The latest figures from the Housing Industry Association and Commonwealth Bank tell a sorry tale for first home buyers, with the proportion of income needed to pay the average first home mortgage leaping back up to 29 per cent, just short of the record level reached in December 2003. To put this in perspective, the equivalent figure from September 1989, with 17 per cent interest rates, was 27.8 per cent.
With another interest rate rise expected before the end of the year - the fourth since John Howard promised to keep rates at “record lows” - there is no sign of things looking up for young Australian families trying to buy their first home.
One has to wonder whether John Howard and Peter Costello understand how important home ownership is, not just as a dream but as a bread-and-butter essential. With an ageing population, home ownership is doubly important. Older Australians who do not own a home by the time they retire will soon find superannuation won't cover rising rents and allow a comfortable retirement.
Many Australians are now asking: if things are so good, why can't I afford to buy a house?
This is the hollow boom in full flight.
The startling fact is that home ownership has in fact fallen during the ten years of the Howard Government. After the longest period of economic growth in Australia’s history, fewer of us own our own homes than a decade ago.
If home ownership rates were the same today as they were in 1995-96, 70,000 more Australian families would own their own home - either outright or with a mortgage. That’s about three suburbs worth.
One reason that the rate of home ownership in Australia has fallen is that skyrocketing prices over the past five years have locked first home buyers out of the market. As a result, the proportion of first home buyers has been below the long term average for four and a half years. At 16.1 per cent of the market, the rate now lies a full 4 percentage points behind the average. Young and not-so-young families are not getting a foot into the housing market and this alarming trend is becoming entrenched.
Given that the number of first home buyers in the market is not keeping pace, the overall level of home ownership is bound to keep falling. The Howard Government can't pretend they haven't been warned about this by everyone from the Reserve Bank, to business, industry and community groups.
If Howard and Costello don't care that home ownership is becoming a more and more distant dream for middle Australia, they should come clean and admit this. But instead the pair have taken the "it's not our fault" line and tried to buck pass responsibility for the mounting crisis to the states.
The media, to its credit, hasn't bought this spin. After all, the prime minister and the treasurer were only too happy to take credit for rising house prices when they thought the housing boom was good news. In March 2004 the prime minister told us that, “the housing boom has been fantastic for the economy”.
The reality is that housing booms - just like dot.com bubbles - are not good economic news in the long run. Don’t take my word for it. Outgoing Reserve Bank Governor Ian Macfarlane said in August, “I do not look upon rising house prices as a period of sunshine … certainly not if they are rising very quickly.”
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