It promises to be an orgy of self-interest – property developers and the welfare industry getting together to fix a problem which doesn’t exist – the housing crisis. Next week in Canberra there will be a National Summit on Housing Affordability sponsored by the Housing Industry Association, the Australian Local Government Association, ACOSS, the ACTU and the National Housing Alliance.
I’ve been watching the slow build-up of publicity in my email inbox, and On Line Opinion will be doing its bit to host some of the debate, but I don’t have the slightest qualm in prejudging the outcome.
There have been a number of housing crises in my lifetime, and every one of them has been made worse by the actions of well-meaning governments and welfare agencies who have tried to peg interest rates, pay deposits for first-home buyers, or otherwise interfere in the market. The only thing that can sustainably increase home affordability is an excess of supply over demand. And the thing that causes that to happen is what we are experiencing now – high prices and optimism leading to over-development and price busts. It might be painful for developers, but hardly anyone else seems to mind for long.
I’m not sure what solutions the summit will come up with, but here is my guide to what you as a non-owner can do to increase your chances of buying your first home.

1. Keep renting. Most people don’t rent the sorts of dwellings that they buy. If you stay in rental accommodation, then it will deprive the owner-occupier housing market of new bodies to keep pushing prices up. Don’t get pressured into feeling you should buy a house. They probably won’t be any more expensive in 10 years time.
2. Invest in the stockmarket. This has two benefits. First, if everyone keeps their money out of the housing market, housing will become cheaper so you will eventually be able to buy one. Second, the returns on shares are going to be much better in the next few years than for housing, so when you get around to buying a house you’ll have a larger deposit.
3. Don’t protest against new developments and urban in-fill. One of the biggest problems for housing is the failure to bring new dwellings and land on when they are needed. Councils and planning laws are the biggest factor here and they tend to follow community pressure.

I’ll be interested to see what policies the summit recommends, but the signs aren’t encouraging, judging by the rhetoric. For example, some publicity I have seen suggests that there are 105,000 people sleeping on the streets in Australia today. This is wrong. ABS stats say there are 105,000 homeless people, but their definition of homeless is rather broad including people who live in boarding houses. Those sleeping rough numbered 19,580, of which half were indigenous, suggesting issues other than the cost of owner-occupied housing as a source problem. Dodgy use of stats tends to undermine your case.
A press release by the organisers says there is a problem because, over the last 10 years:

1. average house prices relative to income have almost doubled
2. the proportion of first homebuyers has fallen by about 30%
3. average monthly payments on new loans have increased by about 50% ($500)
4. the proportion of low-rent homes has fallen by about 15%
5. opportunities to rent public housing have been cut by about 20%.

To which I would respond in order:

1. Yes, but short-term interest rates in 1994 were around 8%, whereas today they are around 4.5%. Investment values tend to fluctuate inversely to interest rate movements. There’s an overshoot, but it’s not that severe.
2. That’s good. It means developers will either need to produce product specifically to supply that market or sellers are going to have to drop their prices.
3. Yes, well in the same time wages have increased 60%
4. Not sure how this is measured, but a proportion dropping by 15% is not as bad as it sounds. 15% of 15% for example is 2.25% of total stock. That might mean that the growth in employment has encouraged some people to move into higher rent homes because they can, leading to a smaller low-rent home requirement.
5. That’s because governments are getting out of the business of building public housing and into the business of paying welfare recipients so they can rent in the private market. It doesn’t mean anything on its own.

All of which is not to deny that homes are more expensive to buy, when measured using loan repayments as a proportion of total income, than they have been for quite some time.
However, a longer-term look at the problem shows that over the last 10 or so years housing affordability has moved around, and that in fact the records are being set more in Sydney and Melbourne than the rest of the country. Things were just about as tough in Brisbane, Perth, Adelaide and Hobart in 1996, then eased off dramatically without any policy u-turns at all.
In all of this I have a vested interest. I do not own a home, but I would like to, and not at today’s inflated prices. To manage that I just need all the interfering busybodies to keep their hands off the industry and let the industry do what it does best. Organise a bust to follow the boom and open a window of opportunity to those of us yet to get into the system.
One of the signs that the market is at its peak and should naturally decline is when someone organises a summit.