Hous­ing mar­ket fore­casts.

As the me­dia, politi­cians and those with a vested in­ter­est scare­mon­ger over the hous­ing mar­ket, the re­al­ity is far less bleak – for those who aren’t rent­ing, at least.

The Saturday Paper - - Contents | The Week - Alex McKin­non

Sen­sa­tion­ally ti­tled “Aus­tralia’s cooling hous­ing mar­ket; is the econ­omy at risk?”, the Or­gan­i­sa­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment’s lat­est eco­nomic sur­vey of Aus­tralia trig­gered a slew of head­lines filled with words such as “crash” and “col­lapse”. The coun­try’s econ­omy, it seemed, was just an af­ford­able two-bed­room unit away from fall­ing over.

It was a good re­minder of Bet­teridge’s law, which states that any head­line end­ing in a ques­tion mark can be an­swered by the word “no”. The ac­tual sub­stance of the re­port was far less dire than it seemed at first glance. “Life is good” was the first con­clu­sion from the OECD’s ex­ec­u­tive sum­mary. “The ev­i­dence of hous­ing-mar­ket cooling is wel­come fol­low­ing a pe­riod of rapid price growth,” its re­port said. “[The] data point to a soft land­ing with­out sub­stan­tial con­se­quence for the over­all econ­omy”.

The OECD nom­i­nated the strength of Aus­tralia’s ma­jor banks, the con­cen­tra­tion of debt in higher-in­come house­holds and high lev­els of mort­gage pre­pay­ment as ev­i­dence the fi­nance in­dus­try is well equipped to han­dle the down­turn in prices. Its own worst pre­dic­tion – that house prices take an un­con­trolled dive and af­fect the wider econ­omy – was de­scribed as “low­prob­a­bil­ity, but po­ten­tially dra­matic”.

While the re­port it­self didn’t con­tain much new in­for­ma­tion, its re­cep­tion is in­dica­tive of a wide­spread fear among the Aus­tralian pub­lic that the hous­ing down­turn is go­ing to get se­ri­ous in the new year. Aus­tralian Bureau of Statis­tics data re­leased this week con­firmed that house prices dropped

1.9 per cent in the year to Septem­ber 2018, with falls of 4.4 per cent in Syd­ney and Dar­win and 1.5 per cent in Mel­bourne.

House prices are widely ex­pected to keep fall­ing in 2019, when a num­ber of fac­tors likely to curb loose lend­ing will come into ef­fect. The royal com­mis­sion into the bank­ing and fi­nance in­dus­tries is due to re­lease its fi­nal re­port in Fe­bru­ary, with rec­om­men­da­tions against ir­re­spon­si­ble lend­ing al­most cer­tain to be handed down. The Aus­tralian Pru­den­tial Reg­u­la­tion Au­thor­ity’s crack­down on in­ter­est-only loans saw their share of mort­gages plum­met from 45 per cent in 2017 to less than 17 per cent this year.

A se­nate in­quiry into payday lenders and other debt in­dus­tries which es­caped the scru­tiny of the bank­ing com­mis­sion be­gan on Wed­nes­day. In Jan­uary, new rules re­strict­ing credit card lim­its will come into force. And a fed­eral elec­tion within the next six months raises the prospect of a La­bor gov­ern­ment that has pledged to abol­ish tax con­ces­sions for wealthy prop­erty owners.

Set against the back­drop of a bank­ing royal com­mis­sion filled with hor­ror sto­ries of banks fail­ing to do ba­sic dili­gence be­fore ap­prov­ing loans, con­cerns about banks now want­ing to ver­ify a per­son’s in­come and as­sets be­fore lend­ing them money seems like a bou­tique prob­lem. But fo­cus­ing on the wealthy and their pre­oc­cu­pa­tions has long been a fix­ture of Aus­tralia’s hous­ing de­bate.

Take the ABC’s three-part 7.30 in­ves­ti­ga­tion last week, which de­liv­ered a grim prog­no­sis for Aus­tralia’s hous­ing mar­ket – largely by re­ly­ing on the tes­ti­mony of prop­erty de­vel­op­ers and in­vestors. Stand­ing on the bal­cony of one of his tower projects in Water­loo, prop­erty de­vel­oper Luke Berry lamented how the credit crunch has af­fected off-the-plan sales of his apart­ments. The pro­gram also fea­tured the Syd­ney-based Gupta fam­ily, who own more than 30 prop­er­ties be­tween them. They sang the praises of “gen­er­a­tional wealth” and “buy­ing as much of the Monopoly board as one sees fit”.

Fi­nance ex­ec­u­tive “Aussie” John Sy­mond ap­peared, mak­ing doom-laden though uncited prog­nos­ti­ca­tions. “If in­ter­est rates went to 10 per cent over the next cou­ple of years, peo­ple couldn’t han­dle that. It would wipe peo­ple out like a tsunami,” he de­clared. Cur­rently, the of­fi­cial cash rate is sit­ting at 1.5 per cent. Last week, Re­serve Bank of Aus­tralia deputy gover­nor Guy De­belle raised the prospect of cut­ting rates even fur­ther, as well as pos­si­ble quan­ti­ta­tive eas­ing af­ter re­cent GDP fig­ures showed Aus­tralia’s econ­omy is ex­pe­ri­enc­ing a slow­down.

Fed­eral La­bor’s pro­posal to abol­ish neg­a­tive gear­ing con­ces­sions for new home buy­ers also at­tracted crit­i­cism from Sy­mond, who warned

“the ram­i­fi­ca­tions are so bad it could tip Aus­tralia into re­ces­sion”. The Aussie Home Loans founder has long been an op­po­nent of the neg­a­tive gear­ing re­forms. Ahead of the 2016 fed­eral elec­tion, he fea­tured in Lib­eral cam­paign ads, say­ing that drop­ping neg­a­tive gear­ing would “def­i­nitely drop the value of homes” and harm “hard­work­ing mums and dads”. He told Chan­nel Seven’s Week­end Sun­rise that a down­turn in peo­ple flip­ping in­vest­ment prop­er­ties could lead to

“mass un­em­ploy­ment” and that a La­bor gov­ern­ment could spell “Ar­maged­don with the hous­ing in­dus­try that’s propped up the Aus­tralian econ­omy the last four years”.

As Sy­mond likely knows, La­bor’s pol­icy would abol­ish neg­a­tive gear­ing only on newly pur­chased homes, leav­ing the perk in place for ex­ist­ing home owners. A Grattan In­sti­tute study from 2016 found that “a higher pro­por­tion of work­ers in high-wage oc­cu­pa­tions neg­a­tively gear and re­ceive larger av­er­age tax ben­e­fits when they do so”.

Choice cam­paigns and com­mu­ni­ca­tions di­rec­tor Erin Turner noted that Sy­mond was not ex­actly a neu­tral party in the de­bate. “The man who sells home loans is wor­ried about the pos­si­bil­ity he might sell fewer home loans,” Turner said. “Mort­gage bro­kers get paid on com­mis­sion. They make more money the more some­one bor­rows. They have ev­ery in­ter­est to in­flate house prices, not in mak­ing sure peo­ple get a fair deal. First and fore­most, prop­er­ties should be de­signed to be homes. I can’t be­lieve I have to ar­tic­u­late that.”

On the whole, eco­nomic ex­perts seem far less con­cerned with Aus­tralia’s cooling hous­ing mar­ket than those spot­lighted by 7.30. Re­serve Bank gover­nor Philip Lowe has wel­comed the down­turn in house prices “at a time when global growth is strong, the labour mar­ket is pos­i­tive and in­ter­est rates are low”. Gold­man Sachs econ­o­mists last week pre­dicted La­bor’s neg­a­tive gear­ing pol­icy would have min­i­mal ef­fect on house prices and the hous­ing mar­ket would con­tinue in “an or­derly de­cline in both prices and con­struc­tion ac­tiv­ity”. That as­sess­ment echoed a fore­cast from Mor­gan Stan­ley’s hous­ing model in Oc­to­ber, which es­ti­mated that “rel­a­tively or­derly de­clines to date will con­tinue”.

What wasn’t can­vassed by 7.30’s in­ves­ti­ga­tion were the im­pli­ca­tions of prime min­is­ter Scott Mor­ri­son’s pro­posal to slash im­mi­gra­tion ar­rivals from 190,000 peo­ple a year to 160,000. Last week, AMP chief econ­o­mist Shane Oliver warned that the con­di­tions driv­ing house prices down “could all be made worse if im­mi­gra­tion lev­els are cut sharply”. New South Wales Trea­sury anal­y­sis leaked to The Aus­tralian Fi­nan­cial Re­view last month came to the same con­clu­sion. And this week, the OECD re­port noted that “im­mi­gra­tion has played a fun­da­men­tal role in the de­mo­graphic, eco­nomic and cul­tural de­vel­op­ment of Aus­tralia, and con­tin­ues to do so with broadly suc­cess­ful in­te­gra­tion of new mi­grants”.

Those on the hunt for a dire story in Aus­tralia’s hous­ing mar­ket, though, need look no fur­ther than Choice’s re­cently re­leased re­port en­ti­tled “Dis­rupted:

The con­sumer ex­pe­ri­ence of rent­ing in Aus­tralia”. Writ­ten with the Na­tional As­so­ci­a­tion of Ten­ant Or­gan­i­sa­tions and hous­ing non-profit Na­tional Shel­ter, the re­port found a rental mar­ket over­flow­ing with shoddy prop­er­ties, ex­ploita­tive land­lords and des­per­ate ten­ants.

Many renters ex­pressed fear about in­vok­ing their rights as ten­ants for fear of evic­tion. Of those rent­ing, 51 per cent re­ported liv­ing in a prop­erty need­ing re­pairs. Al­most half be­lieved ask­ing their land­lord or agent to fix prob­lems in their home would get them evicted.

Us­ing the Twit­ter hash­tag #Ren­tInOz, peo­ple re­counted their hor­ror sto­ries – ceil­ings col­laps­ing af­ter months of un­re­paired wa­ter dam­age, be­ing elec­tro­cuted by faulty wiring and fuse boxes, land­lords re­fus­ing to re­move ex­posed as­bestos in­su­la­tion.

One shift worker was not al­lowed to hang cur­tains in his bed­room, lead­ing to sleep de­pri­va­tion when he worked nights and was un­able to sleep dur­ing the day. A dis­abil­ity pensioner re­ported that a hole in their bath­room ceil­ing had gone un­fixed for six years.

The re­al­i­ties pre­sented by the me­dia’s re­sponse to the OECD re­port, the 7.30 spe­cial and the “Dis­rupted” sur­vey seem worlds apart. Shel­ter NSW chief ex­ec­u­tive Karen Walsh dis­misses much of Aus­tralia’s hous­ing de­bate as a “ne­olib­eral mantra” that favours the wealthy over the vul­ner­a­ble.

“Home­less­ness has in­creased by 14 per cent be­tween the last two cen­suses, but we don’t see an ur­gent in­jec­tion of money to fix that prob­lem, be­cause they’re not the wealthy,” she says. “As soon as any pol­icy or eco­nomic is­sue im­pacts wealthy prop­erty owners, we see this me­dia sen­sa­tion­al­ism that scares peo­ple.”

Ten­ants’ Union of NSW se­nior pol­icy of­fi­cer Leo Pat­ter­son Ross is slightly more op­ti­mistic, con­trast­ing the con­ver­sa­tion now with that of a few years ago.

“I think it’s slowly break­ing down. We weren’t talk­ing about rent­ing at all a few years ago. You would only see A Cur­rent Af­fair bash­ing pub­lic hous­ing ten­ants,” he says. “But it’s slow. We still only re­ally con­sider home own­er­ship to be the one true path, which is quite strange com­pared to the rest of the world. Hous­ing is some­thing that’s es­sen­tial for life, and we leave it up to in­di­vid­u­als in a

• mar­ket sys­tem.”

“AS SOON AS ANY POL­ICY OR ECO­NOMIC IS­SUE IM­PACTS WEALTHY PROP­ERTY OWNERS, WE SEE THIS ME­DIA SEN­SA­TION­AL­ISM THAT SCARES PEO­PLE.”

Op­po­si­tion Leader Bill Shorten at a Com­mu­nity Hous­ing In­dus­try As­so­ci­a­tion sem­i­nar last month.

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