Page 2796 - Week 09 - Thursday, 27 September 2007
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The latest ANZ Australian Property Outlook dated August 2007 supports this demand side analysis. In addition, the market and, importantly, interest rates and long-term economic stability have added to this crisis. Substantial increases in purchasing power led to intensive competition for establishing housing in existing inner and middle ring suburbs as owners increased equity in their dwellings. This had the effect of pushing up other property prices.
The 2004 Productivity Commission report First home ownership noted that since the mid-1990s house prices in Australia had risen significantly, but the escalation in prices had been more prolonged, cumulatively greater and more widely spread than in previous upswings. The commission concluded that, while surging house prices was a signal that demand had been outstripping supply, the dominant source of this widespread escalation was the general surge in demand. The surge in demand was a product of cheaper and more accessible housing finance; prolonged economic growth and a rise in real disposable household income; established home owners trading up to improved—bigger, nicer and better located—housing; a boost to demand driven by specific commonwealth schemes such as the first home owners scheme; and changes to capital gains taxation.
The increased liquidity caused by changes in commonwealth economic policies and incentives, strong returns on housing investment and national economic trends had a major impact on house prices in the ACT, as indeed it did elsewhere in Australia. In the ACT, population increases, largely due to commonwealth public service employment, have grown sharply and rapidly increased housing demand and caught the ACT government off guard due to a lack of consultation between governments.
The ACT’s healthy economy, with an unemployment rate which is the lowest in the country and household incomes outstripping all other states and the Northern Territory, has continued to support growth in house prices. This is good news for those already owning or investing in houses, but very difficult for those who are trying to buy into the housing market.
According to the latest ANZ Australian property outlook, rental markets in the ACT tightened further with the vacancy rate down to just 1.3 per cent while rents have risen sharply by 14.8 per cent. This report predicts that affordability across Australia will deteriorate sharply in the years ahead. We must do all we can to stop this happening. The commonwealth must also accept its responsibility.
While the federal government has the greatest influence over housing affordability through broader fiscal and monetary policy, taxation policies and specific programs, the Labor government will do its bit to improve housing outcomes through those mechanisms over which it has control.
Many statistical and financial indices show that buying a home in the ACT is still affordable for the majority of Canberrans, given the ACT’s high median household income. However, changes in the housing market have made the dream more elusive for many low to moderate income Canberrans. This has placed greater pressure on the private rental market and on public and community housing services.
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