Unless you’ve been living under a rock, you’re probably aware that house prices have been marching skywards.
February Corelogic figures showed house values increased by 22.4 per cent in 12 months, marking the biggest cyclical increase ever.
This is welcome news if you already own a house. Less desirable if you don’t.
Also read: NAB’s worrying rent price prediction
Home-ownership rates are falling fast because it now takes so long to save for a deposit, especially for young people who don’t have the luxury of asking ‘the bank of Mum and Dad’ for help.
It now takes 12 years on average to save a 20 per cent deposit compared to just seven years in the 1990s.
The tough reality is when people don’t make it into the housing market, they end up renting into retirement, where they are more likely to sink into poverty.
There’s been no shortage of policy suggestions to level the playing field for first-time buyers, including scrapping negative gearing and the capital gains tax discount.
Here are a few other lesser-known ideas that might improve the affordability of housing in Australia.
Government signs on as co-purchaser
The Grattan Institute’s economic policy program director, Brendan Coates, recently suggested a national shared equity scheme, where the Government coughs up for a fraction of your home.
Such a scheme would see the Federal Government chip in as much as 30 per cent of the home’s value without charging interest or rent. The rest would come from a private lender, with at least a 5 per cent deposit from the buyer.
Under the arrangement, the buyer would still cover costs such as conveyancing, stamp duty, council rates and maintenance.
When the house is sold, the government would be paid back its proportionate share of the profits.
Some shared-equity schemes already exist at the state level but are small and limited to public-housing tenants or to homes bought from government-run developers.
Coates said the Federal Government was best-placed to run a shared-equity scheme.
He also said the scheme would create more demand for housing and drive up house prices, but said that effect would be modest, especially if it was strictly targeted at low-income earners and lower-priced homes.
A tax on empty homes
In hot property markets, investors have been known to leave properties empty so they can time their exit to maximise capital gains instead of locking themselves into long-term leases.
This can diminish the supply of available rentals.
Last week, it emerged that hundreds, potentially thousands, of homes were sitting empty in Tasmanian cities, despite vacancy rates in Launceston and Hobart dipping below 1 per cent.
In some places, taxes on empty properties have been used to curb this practice. Empty homes in Melbourne currently incur a vacancy tax, with dwellings charged 1 per cent of the property value if they gather dust for more than six months.
It’s unclear how effective these taxes are. A review of a vacant-dwelling tax in Vancouver found it coaxed more owners to rent out their properties but had a fairly modest impact on housing affordability overall.
Rent and consider buying later
The private sector has also produced some interesting solutions to the housing crisis.
Melbourne-based property developer Assemble has come up with a clever model where residents rent a home securely for five years and have the option to buy their home at the end of the lease for a price set at the beginning.
Aimed at moderate-income buyers, the housing model also helps renters save by offering free financial coaching.
The cost of utilities and other living expenses are also kept low as these goods and services are bought in bulk for all residents of the development.