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When the Bank of Mum and Dad Runs Dry

Artwork By Lin Abdul Rahman

 

I love Melbourne. It’s a pretty special place. Dubbed as Australia’s cultural capital, it doesn’t disappoint in it’s vast offerings. Don’t just take my word on that: the international community feels the same with Melbourne being the most liveable city for six years running. I can’t think of anywhere else I’d rather call home, and I’m assuming a lot of you feel the same way. However, despite my love of the city, I am seriously worried about my future ability to do so.

Let’s get things straight; we as university students and future graduates are in a far better position than a lot of other young Melburnians. In spite of this, I am genuinely concerned that I’ll never be able to own a home; instead I will be forced into a lifestyle at the perpetual mercy of a duplicitous landlord.

The statistics are pretty frightening. In 1980, the median house price in Melbourne was a pittance at $40,800. Today that figure stands in excess of $700,000. Even after taking into account inflation over the past three decades, that is still an absurd increase. To afford even an average home in Melbourne’s leafy inner suburbs, you’d need to have an income in excess of six figures. On top of that, it would also require a massive saving effort to come up with a deposit large enough to avoid mortgage lenders insurance, and to cover the associated stamp duty fees.

The picture is pretty bleak. So the question I ask myself is, what the hell is the government doing to address this systemic issue?

The Andrews Government

To the credit of the current State government, they’ve actually done something about it. The recent package of changes included no stamp-duty on properties under $600,000, a saving of up to $32,000, and a doubling of the first-home owners grant for regional purchases. There is also a trial program whereby the government supplies 25% of the full purchase price, essentially footing the cost of a deposit. The government then retains a 25% interest in the property that they recoup when it is sold. This goes to the heart of the issue, because coming up with a large deposit for a property is often the biggest barrier to homeownership.

Despite the strides made, there are still structural issues that aren’t addressed by these policies. If the government were to roll out the input equity policy, they would be massively at the mercy of any future housing market collapse, and it could potentially put taxpayer dollars in a precarious position.

The Opposition

Leader of the Opposition Matthew Guy has also put his mind to the issue, coming up with a sensational, agile and very innovative Nine-Point Plan for addressing the crisis. His ideas mainly revolve around helping out those ‘charitable’ development companies by reducing barriers to development to increase supply. He’s also noted the need for jobs to be located outside the CBD and for better public transport links.

While (as much as it pains me to admit it), he is on the money when it comes to spreading employment opportunities and public transport access, Guy’s actions tell a very different story. The vicious opposition to the Andrews governments public transport investment shows that his party isn’t interested in investing for the future. He should be criticised for focusing primarily on development rather than access, as it is clear from the number of foreign buyers in Melbourne that there is supply, just that it’s going to investors rather than young buyers.

The Federal Government

This is more than a state issue, as is made clear by the fact that housing unaffordability in Sydney is rivalled only by Hong Kong. This would lead one to suppose that the Federal Government would also make concerted efforts alongside the States to address the issue. Well, to see the reality of this, let’s look at a couple of Ministerial statements.

The Prime Minister, Malcolm Turnbull. (Now just prepare yourself for the sheer idiocy of our nation’s leader.) He suggested that young people should tap into the ‘bank of mum and dad’ and get them to shell out to help their kids enter the market. Now unlike some politicians or demagogues, where a small loan of a million dollars is but a phone call away, the clear majority of young Australians simply cannot rely on their parents to fork out $120,000 plus for a deposit. Let’s not overlook the fact that Malc was able to buy his first home in inner Sydney’s Newtown WHILE a student for the equivalent of $82,000, and then sell it three years later for FOUR times as much.

Deputy Prime Minister Barnaby Joyce has suggested that if you don’t like house prices in big cities, you should move to Charleville. Now without passing comment on what I’m sure is a charming rural town, the idea that young people should make such a life-altering move, (in this case, a cruisy 742 km from Brisbane), is nothing but ignorant.

Assistant Minister to the Treasurer, (and the man responsible for addressing housing affordability), Michael Sukkar suggested that the first step to getting into the housing market was to get a ‘highly paid job’. That’s a ripper idea, thanks Minister. I’ll just go down to my local supermarket and get a job, getting paid a good base wage and penalty rates…. Oh wait the government just stood by as penalty rates were cut and the minimum wage is at an almost un-liveable level. How can this be an acceptable view to hold? Highly paid jobs don’t exactly grow on trees, and they are increasingly more difficult to acquire with unemployment at almost 6 percent.

But enough of exposing the hypocrisy of the current Federal Government. What we need are leaders who are up to making the hard, unpopular choices. As the Senate Select Committee into Housing Affordability notes, there are ‘tax system incentives which have encouraged investment in second and third properties’. Negative gearing needs to be severely limited, and foreign investment in residential real estate needs to be put under far greater control. That’s an unpopular position, and I’ll admit that. However, it is clear that the trajectory of the market is upwards, and it has a real potential to create a stratified class system in Australia. Young people would be forced into a lifetime of exorbitantly expensive renting, with the older generations leeching their capital and preventing them from saving. With prices remaining so high, getting that first property would be all but a pipe dream.

 

Benjamin Caddaye

The author Benjamin Caddaye

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