The Commonwealth Banks Senior Economist, Michael Workman, has today made a simple and logical statement that housing affordability in Australia will continue to suffer until the Federal Government reforms tax policies that favour investors over first home buyers.
Mr Workman said:
The amount required for a 20 per cent deposit on a dwelling purchase continues to move well beyond the reach of most households.
Investors will continue to be a significant influence on housing prices in 2017 and onwards until federal tax laws favouring leveraged housing investment are reformed.
The Federal Government controls some of the significant demand factors for housing markets, namely population growth via migration and the spectrum of tax and foreign investment policies that significantly inflate demand for existing and new housing.
Housing affordability can be improved, via stabilising growth in house prices and rents, by gradual reforms to both supply and demand issues.
This statement follows repeated calls last week from Federal Liberal MPs, John Alexander and Andrew Hastie, for the Coalition Government to at least examine reforms to negative gearing. That follows similar calls from former NSW Liberal Premier Mike Baird and his Planning Minister, Rob Stokes.
Instead of attacking individuals who call for reform, Scott Morrison needs to get the message that its time to drop the ideological opposition to reforming negative gearing and to work on a housing affordability plan to address both supply and demand concerns.
Last year, Scott Morrison boldly told the nation there were excesses in negative gearing. Then the Prime Minister and Treasurer were rolled by their own Cabinet on plans to reform negative gearing.
Now apparently its okay for the taxpayer to underwrite multiple investment property purchases as young first home buyers are shut out of the property market, all at a time when Australias triple-A credit rating is under threat.
A year after Labor announced its reforms to negative gearing and the capital gains tax discount, the Prime Minister has begun to talk about housing affordability.
The fact of the matter is that a housing affordability plan without reforms to negative gearing and the capital gains tax discount is a housing affordability sham not a plan.
Malcolm Turnbull and Scott Morrison are becoming increasingly isolated on their pronouncement that housing affordability can only be improved by supply side measures.
Its time for Mr Turnbull and Mr Morrison to listen and act by reforming negative gearing.