Why are young Australians barred from home ownership? The answer is politics | Intifar Khovdhury

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HOwning property is a much-revered Australian milestone, a sign of independence in adulthood and a key to economic security. But today, the big Australian dream of owning a home in your 20s isn’t for everyone.

I used to watch rising real estate prices with blinking horror; now I’m not looking. Even the lockdown couldn’t slow the pace. Housing prices skyrocketed further than we could match, further dampening young Australians’ yearnings for home.

Homeownership rates have been falling since the 1980s in a nation that once boasted of being an egalitarian society. With the generational decline in stable income and an increase in debt-to-income ratio, young people and those on modest incomes gradually became locked out of the real estate market.

As a result, many young adults share rented apartments or boomerangs to their parents’ homes for economic reasons. Home ownership is becoming increasingly inheritable; something achieved earlier is more likely to be inherited by those who are come from the money.

A global pandemic is exacerbating the situation. With borders closed and lockdown tight, the concept of home extended to work, school and all other aspects of society. The increasing importance of a well-designed home gave a boost to the already burgeoning real estate market.

As a result, more and more of us are renting in droves and sighing heavily at the diminished prospect of ever owning a home. Perhaps there was a time a few years ago when the advice to “stop buying mashed avocados at $19 and four coffees at $4 each” would bring a young person closer to a house deposit. Now it will take us more years of sacrifice before that advice bears fruit.

Most importantly, not every youngster can afford avocado toast at a hipster cafe.

The crisis of housing affordability is mainly the cause living stress among low-income youth – the real losers. High housing costs such as rent payments limit spending on other essentials – food, health care and education – and take away disposable income from many aspects of well-being.

But what’s causing the real estate frenzy?

Last year house prices up a whopping 24% in some parts of the country.

There are mutliple reasons for this. First, easy borrowing and low interest rates or mortgage rates in one limited offer market have generated a very high demand for housing.

Second, investment incentives like capital gains tax rebates and negative gearing are concentrating more homes in the hands of investors and fewer in the hands of first-time owners.

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Third, the property market has been incredibly resilient to economic disruption caused by Covid, with stay-at-home orders placed during protracted lockdowns and Australians investing within impermeable borders.

High demand and low sales have combined to increase competition and further boost asset prices. Competitiveness and FOMO sentiment among able buyers has also driven house prices to unrelenting heights, particularly in Sydney’s inner suburbs.

Why is the housing market a complex code break?

The answer is simple: Politicians believe that rising house prices will create more economic winners than losers among their voters.

Indeed, Treasurer Josh Frydenberg noted back in June that the increase is good for the economy. The federal government expressed lukewarm sympathy to those struggling to get a foot in the property door for the first time, while cheerfully noting that many households are doing so extraction of sustained house price inflation. So price hikes are here to stay because simple solutions — like building more houses and taxing real estate investments appropriately — don’t make as much political sense.

This is the reality of things: those with power and money affect the market more than those without. Therefore, the winners become bigger winners and the losers keep losing.

We are not facing an insoluble crisis today, but there is a lack of will to solve it among those who are able to do so.

Two things we can do: investments + Choose

Economist Saul Eslake forecast The homeownership rate for Australians in their 20s to mid-30s will be lower in 2021 than it was at the 1947 census. Demand for new homes, tight supply and rising vacant property prices will continue to rise pressure up on real estate prices in the coming years. Prices are to be expected rise, In spite of Rate revisions by the RBA and a fall in the housing mood among real estate professionals.

It seems that younger generations succumb to a natural sense of fatalism and grudgingly submit to it intergenerational theft. Very few in their 20s and early 30s are actively planning their housing future, while the majority of Australian voters believe Price jumps will be bad for the next generation.

There are two things we can do. The first is a personal solution, the second is collective action.

Investing or making a profit by putting money into financial systems is another way to build a nest egg and/or make “rent money”. While it’s difficult to make informed investments because it takes time to understand the market and pick the right stocks, careful research is leading Millennials to be increasingly conservative in investing Mutual Funds (ETFs) while a handful are explore the highly volatile but hugely lucrative world of digital currencies.

The second (and somewhat blunt) solution is to make informed economic choices. To do this, it is important to follow the political games of political parties and candidates to understand how their policies affect our financial future. For example, in the 2019 election, the Liberals fought against the “housing tax”. – a policy that the Labor Party dropped after losing the election. Labor wants to reduce tax incentives for investors, the Greens want to do away with them altogether. But changes in investment policy will not be a silver bullet.

On the other hand, it is important to find out what financing programs are in place to help young people with both housing affordability and homeownership crises. We know that Initial homebuyer programs are not enough and despite the federal guarantee for home loans, homes continue to creep beyond the reach of first-time buyers. All in all, the upcoming 2022 election is crucial.

In summary, the most important thing is to understand why the real estate market is soaring and what this means for us in the short and long term. This will help us to plan and act accordingly to minimize economic burdens. It may seem like a complex minefield, but passive approval, or worse, political apathy, won’t help us.

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