Page 4088 - Week 13 - Thursday, 6 December 2007
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The sudden and substantial expansions of commonwealth public service employment in the last two budgets have put pressure on the ACT housing market and increased demand for purchase and rental properties. It is relevant and pertinent to say that, if the commonwealth had engaged the ACT, we may have been able to smooth some of that spike. Despite that, the ACT government has responded quickly and comprehensively to the very high demand for housing in the ACT. I expect that the new Rudd Labor government will be more consultative with us on these issues.
I also mention the ongoing impact of continuing high demand for housing. Ian Macfarlane, former head of the Reserve Bank, was quoted in the Financial Review on 17-18 March 2007 as follows:
… why have the prices of the eight million houses in Australia basically doubled in the last decade? The answer … is almost entirely on the demand side.
In addition, the market and, importantly, interest rates and long-term economic stability have added to the current affordability problem for some potential home buyers. Substantial increases in purchasing power led to intensive competition for established housing in existing inner and middle ring suburbs as owners increased equity in their dwellings. This has had the effect of pushing up other property prices.
I also note that the key driver of cost in recent months has been interest rates—not house prices; interest rates. Since 2004, house prices have grown by less than household incomes, with the effect of improving affordability. In other words, in the absence of interest rate increases it would have been easier for households to enter the housing market. Since 1996, during the time of the Howard government, interest payments on the average mortgage have grown by 31 per cent of average individual earnings to 39 per cent of average individual earnings. That is the most significant statistic in relation to housing affordability currently—that since 1996 interest payments on the average mortgage have grown from 31 per cent of average individual earnings to 39 per cent of average individual earnings. That is the great legacy of John Howard and the Liberals, including the Liberals in this place.
I also point out that the Real Estate Institute of Australia home loan affordability results for the September quarter 2007 show that the ACT continues to have the most affordable home loans in the country. According to Peter Blackshaw, in the ACT the proportion of family income required to service the average home loan is 20.7 per cent, well below the national average of 36.6 per cent and the lowest in Australia. According to Peter Blackshaw and the REIA, the median house price in Canberra fell 0.4 per cent in the September quarter 2007. In the year to the September quarter 2007, the median house price in Canberra rose by eight per cent.
In addition, the following shows that the housing sector continues to be strong. The vacancy rate for all rental dwellings in the ACT rose from 1.3 per cent in the March quarter to 2.4 per cent in the June quarter 2007. Median house rents rose by 2.2 per cent in the June quarter. Despite interest rate rises, the housing market remains resilient and vibrant. ACT housing finance commitments for owner occupiers rose at a healthy annual rate of 20.9 per cent in September 2007, well above the national
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