Home ownership in Australia becomes just a dream for most.

In 1996 an analyst predicted that the then Howard Federal government’s policy of reducing the stock of public housing would eventually lead to a crisis in housing across the board. Low cost rental properties the government then said, would be taken up by free market forces who would provide rental properties at more affordable prices for both renters and the poor.

Incentives for people to enter the property market encouraged the boom and the unsustainable price rises that now have come crashing down. The market was never geared to providing housing for the marginalised and these people are increasingly being pushed out of housing.

Well, the prediction of doom has finally come to pass and Australia is facing a housing crisis of monumental proportions. Rental accommodation has dried up at the very time that 1 million Australians are facing mortgage stress ( paying over 30% of their incomes on the mortgage) and the Reserve Bank is certain to raise interest rates once again tomorrow, thereby forcing landlords to pass on the increased impost as higher rental prices. The spiral thus increases. Just as in the case of the sub-prime crisis in the US, purchasers in outer suburbs and less affluent areas are finding that, for the first time, the value of their properties are falling. The result being, that if a sale is forced, the buyer will now face a large debt after the sale.

This situation is unprecedented in the large numbers of such sales. The spread of suburbs involved in this slide of prices is so large that there is a very real danger of Australia facing a divide of the those in affluent suburbs whose properties are rising dramatically leaving behind those in the outer suburbs who face increasing losses. In fact, houses bought within the last five years saw losses of $20,000 in Sydney’s west southwest while in some cases the losses were as large as 40% of the original purchase price.

Investment in housing is stagnating and the market is showing signs of reluctance to provide housing in the depressed areas. The catch 22 is that properties are out of reach for lower and middle income buyers and the rental market is fully let with minimum vacancy rates. If nothing is done increasing numbers of the poorest amongst us are now facing homelessness.

There is no relief in sight with demand dropping and prices set to fall even further with the best outcome being a flattening out of prices for those in the affected suburbs. The problem is set to continue for the less affluent areas in foreseeable future.

The Rudd government has responded by increasing their election promise expanding the National Rental Affordability Scheme by 50,000 to 100,000 homes over ten years. Investors will be offered tax credits of $6,000 for 10 years if new properties are rented for 20% less than market rental rate. This at least will help some of the low wage earners that have been squeezed by previous policies that have distorted the rental market. It is a beginning.

Perhaps the great Australian dream of owning your own home, up to now open to all is really becoming just that – a dream!

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~ by abstraktbiblos on Monday, 3 March, 2008.

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