Boom hits young Aussies mostOverseas Education | Emily Cadman 12 Oct 2017
Home ownership among young Australians has fallen to the lowest level on record, as an explosive property boom squeezes out all but the wealthiest. Supercharged by record low interest rates, a lack of supply and a tax system that favors property investors, home prices have surged more than 140 percent in the past 15 years, propelling Sydney past London and New York to rank as the world's second-most expensive housing market.
Melbourne is now the planet's sixth- most expensive place to buy a house.
In response, home ownership among the young has plunged: only 45 percent of 25- to 34-year-olds own their own home, down 16 percentage points from the 1980s, with almost half the decline coming in the past decade. Hefty mortgages have pushed household debt to a record, acting as a drag on the economy's 26 years of unbroken growth.
As more people retire still owing a mortgage, or renting, they are more likely to qualify for government welfare.
"The great Australian dream of home ownership is becoming a nightmare," said Brendan Coates, a housing policy expert at the Grattan Institute. "It's down to a failure of government policy that will take at least two decades to fix."
Voter angst over housing affordability is mounting: almost 90 percent of Australians fear future generations won't be able to buy a home, according to an Australian National University survey.
One of the biggest flashpoints are tax incentives that have turned housing into a speculative financial asset. First-home buyers complain they can't compete against investors, who through a perk known as negative gearing can claim the costs of owning a property-for-rent as a tax deduction against other income.
The allure of property investment was turbocharged in 1999, when capital gains tax was halved.
More than two million, or one in 12, Australians own an investment property, with almost 30 percent of those owning two or more.
As the average price of a Sydney home sailed past A$1 million (HK$6.07 million) , housing affordability fell victim to the hyper-partisanship that has gripped Canberra over the past decade and paralyzed policy making. Measures in the May budget aimed at improving housing affordability only tinkered at the edges - targeting overseas investors who leave properties vacant and offering tax breaks for people saving for a deposit on their first home.
"What politicians have offered so far are band-aid solutions that might be popular in the short term but ineffective in the long run" said Judith Yates, an honorary associate professor at the University of Sydney.
In contrast, other global cities have taken more draconian measures to rein in home prices.
Singapore has rolled out a series of measures from banning interest-only loans to pushing up stamp duty, triggering a three-year slide in prices.
In Canada, prices have slumped in Toronto after the provincial government announced a slew of measures, including a 15 percent tax on foreign buyers and the introduction of rent controls.
Adding to demand pressures, Australia's migration program has helped swell the population by almost four million since 2006, with most settling in the major cities. Supply has been unable to keep up, with dwelling completions running below underlying demand for more than a decade.