The madness of rising house prices cannot be allowed go on. Apart from higher prices making it harder for our kids to get into the property market, there is the broader impact on the economy.
Ever bigger mortgages simply mean less of our wealth is used for productive pursuits, such as capital going into new start-ups that employ people, or invested in companies working on cures for diseases.
Houses are, after all, just shelter, but in Australia they have a privileged position in our tax and social security system – and anyone suggesting there should be any changes to that had better watch out.
Just ask federal Labor, who took some sensible housing policies to the last election and the one before that. Policies which have since been dropped.
The party’s platform had included restricting the use of negative gearing and a reduction on the discount on tax on capital gains on investment properties. Had those policies come into force, it is likely the latest prolonged surge in prices would not have been as steep.
While first time buyers have been attracted by record-low mortgage interest rates and government assistance, it is investors in search of easy capital gains who have been driving the most recent phase of the upswing.
Sydney home prices are up 23.9 per cent for the year ended September 26, CoreLogic figures show. Melbourne prices are up 14.8 per cent over the same period.
One sure-fire way to slow price rises is for interest rates to start rising, just as the cutting of the cash rate to help stimulate the economy during COVID-19 has helped prices on their way up.
However, that is unlikely to happen until at least the end of 2023, as the Reserve Bank of Australia says it will not be increasing official interest rates until wages growth has pushed inflation back to the upper end of its 2 to 3 per cent target band.