Worries grow for first-time home buyers in Australia

IN A seemingly harmless remark about Australia's booming property prices, Australia's Treasurer, Mr Joe Hockey, suggested last week that young people struggling to afford a first home just need to go and "get a good job". 

He was attempting to point out the potential benefits to home buyers of Australia's record-low interest rates of around 2 per cent. But the comment caused a public outcry, with some analysts suggesting it could cost Mr Hockey his own job. 

The problem was that the Treasurer, who happens to own a comfortable property portfolio, appeared to have failed to notice the deep and growing concern in Australia about the problems for first-time home buyers of entering the soaring property market.

The recent boom has benefited owners and investors in capital cities but left the traditional national aspiration of owning a home out of reach for growing numbers of younger Australians. 

House prices in Sydney have risen 39 per cent in the past three years while wages have stagnated. The median Sydney home price is about A$914,000 (S$945,000) - a price to income ratio of 11.4, compared with a ratio 30 years ago of 3.4, according to Fairfax Media.

Professor Carolyn Whitzman, an expert on urban planning at Melbourne University, said the lack of affordable housing was affecting all generations across low- and middle-income families. 

"Joe Hockey's comments were out of touch with the reality of most people in Australia," she told The Straits Times. 

"Even people with good jobs simply cannot afford to buy a house or even rent an appropriate place. Almost everyone is affected either by being a young person and finding it hard to purchase his own home or parents finding it difficult for their adult children to move out."

Analysts say the recent boom has largely been caused by the low interest rates. Other factors include an influx of foreign investors, easing of restrictions on investing retirement funds in housing and a lack of new land for housing. 

But the new buyers have increasingly been investors, rather than those buying a first home to live in.

In April, just 14 per cent of new home loans in the state of New South Wales went to first-time buyers, compared with 31 per cent in 2009. Investors accounted for a record 62 per cent of loans. A Fairfax/Ipsos poll on Monday found just 18 per cent of people in Sydney thought housing was affordable.

Experts and economists have begun calling for the government to adopt measures to rein in the boom and address the social costs. Others have called for state governments to release more land for housing in cities such as Sydney and Melbourne to increase supply and drive down prices.

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A version of this article appeared in the print edition of The Straits Times on June 19, 2015, with the headline 'Worries grow for first-time home buyers in Australia'. Print Edition | Subscribe