FOR the past five years dramatic property price increases in Melbourne and Sydney have pushed up prices across the country, to almost alarming degrees in some areas.
Sydney prices jumped 56 per cent in that time. Property reports at the end of 2017 were gushing that the national property overall growth rate was at the “fastest pace since 2009”. A year later the same reports were gasping about the “weakest housing market conditions since 2008”.
When Melbourne and Sydney get the jitters, prices in the regions follow suit. When prices climb again in the major capitals, regions tend to follow more sedately and less dramatically.
There’s a lot of talk about property at the moment for different reasons, but looming elections would be fuelling some of it. Politicians worry when the property market gets the wobbles, and tend to shrug off the negatives that come with a boom.
They know that two in three Australians own a home or are paying off one. It is the major asset for many people, in part because the family home is not taxed. People like it when their assets are suddenly worth a lot more than they used to be, even if they have no plan to sell to realise the capital gain. Politicians also know that the “Australian dream” of home ownership underpins a strong construction industry, and construction keeps people in jobs and money circulating.
Australia needed a correction in its upward property spiral, which largely shut out first home buyers and was fuelled by tax policies that still privilege existing owners, coupled with years of very low interest rates.
It could be argued that regulators took much too long to force financial institutions to put the brakes on investor lending. The banking royal commission has shown some lenders had little regard for borrowers’ capacity to pay or the likelihood that a market correction could leave people with loans greater than their properties are worth.
The reality for millions of Australians is that owning their own home remains completely out of reach. That should not be forgotten as we come back to earth after a period of property prices on steroids.
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