This article from October last year but really, nothing has changed. It has even gotten worse.
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By Gemma Daley Oct. 25 (Bloomberg) -- In what Prime Minister John Howard calls Australia's greatest period of prosperity, Melbourne social worker Jane Lazzari can't afford her dream. ``I want to be a homeowner, and it's not an unreasonable thing to want in this economy,'' said the 39-year-old single mother of two, who earns A$65,000 ($58,700) a year, well above the average Australian income of A$56,600. The ability of Australian families to buy a house or repay a home loan is at a historic low. That's bad news for Howard, 68, who has called for a general election on Nov. 24. A Newspoll survey published in the Australian newspaper Oct. 23 showed his Liberal-National coalition 16 points behind Kevin Rudd's Labor Party. ``Housing affordability is a vote-winner,'' said Rick Kuhn, an economics and politics professor at the Australian National University in Canberra. ``At the moment, Howard loses.'' The prime minister is partly a victim of his own success in boosting the economy, which has grown an average of 3.5 percent a year since he came to power in 1996. When he first took office, Howard vowed to stand up for ``battlers'' -- average working Australians. In 2000, his government introduced a A$7,000 tax-free grant for first-home buyers in any income bracket. The government has spent A$7.6 billion on the program and given grants to more than 1 million homebuyers.
Bandwagon
Millions of Australians jumped onto the real-estate bandwagon, spurred also by new sources of financing from nonbank lenders such as Wizard Home Loans and Aussie Home Loans Ltd., both based in Sydney. The median price for a house in Australia is now A$423,900, roughly 70 percent more than in the U.S. and almost triple the median of A$141,600 when Howard was first elected. During the same period, wages have risen only 19 percent, which means mortgage payments now account for 30.7 percent of family income, compared with 17.9 percent. The rate of home ownership has also slipped. In 1996, 37 percent of people lived in a place they owned and 29 percent were in the process of buying. In 2006, 36 percent owned and 27.5 percent were buying. Howard hasn't introduced any new housing policies since 2000. His government has discussed doubling the first-home grant and allowing people to draw on their retirement, or so-called superannuation savings, for a deposit. Officials of his ruling coalition have said they will announce a plan before the election.
`National Approach'
Rudd argues that there ``must be a national approach'' to make housing more affordable. If his party wins the election, he has promised to spend A$500 million in the next five years to subsidize 50,000 first-home owners, and A$603 million in tax incentives during the same period to encourage investment in 50,000 new rental homes. ``A good housing policy will change my vote,'' Lazarri said. The average monthly loan repayment for a first home rose to A$2,506 in the second quarter of this year, pushing affordability to its lowest level since records began in 1984, the Housing Industry Association said in an Aug. 13 report.
`Half a Million'
``We have to get a mortgage of more than half a million dollars for a unit,'' said Ben Ommundson, who rents a two-bedroom apartment with his partner and her six-year-old daughter in a suburb of Sydney, where prices have gained 37 percent in five years. ``It's almost impossible to get into the market,'' he said, even with an annual household income of A$130,000. Lawmakers lay part of the blame for shrinking affordability on local taxes imposed by state governments, all of which are controlled by the Labor Party. New South Wales local and state taxes and charges add A$68,233 to the cost of a home in Sydney, according to Property Council of Australia figures. There is also a ``chronic'' lack of land on which to build homes, the council said in a report entitled ``Boulevard of Broken Dreams.'' Howard has said the market is still healthy, telling Parliament on Sept. 20 that ``a true housing crisis is where there is a sustained fall in the value of our homes.''
Still Healthy
He has urged state and local governments to reduce land taxes. He also asked the Treasury Department for an audit of available land, but the results haven't been announced yet. ``The longer we go without tangible policy action, the worse the situation will become,'' the Housing Industry Association's Managing Director Ron Silverberg said. Even people who managed to buy when prices were lower are struggling with interest rates that have increased five times since Howard's 2004 election campaign, when he promised to keep a lid on them. The latest came on Aug. 8, when the Reserve Bank of Australia raised its target rate to an 11-year high of 6.5 percent. The central bank may raise rates again before the election, after a report yesterday showed underlying inflation rose at the fastest pace in 16 years. The bank will increase its benchmark rate a quarter-point to 6.75 percent on Nov. 7, according to 26 of 27 economists surveyed by Bloomberg News yesterday. As of June, more than 80 percent of home loans had flexible or a combination of flexible and fixed rates, according to the Australian Bureau of Statistics. ``When I heard interest rates went up, I thought, `Oh my God, not again,''' said Lisa Jackson, a full-time mom who owns a house in Sydney's Glenmore Park neighborhood and owes A$260,000. ``We have to tighten our belts, we won't get takeout food and I'm looking for specials in the supermarket.''
