A SERIES of housing policy flops have conspired to keep would-be homeowners out of the property market at a critical juncture for the nation, a leading economist has warned.

In a withering report, economist Saul Eslake says the government policies have served to merely inflate demand for housing while failing to promote the supply of new homes - a key driver of economic growth.

He says controversial first-home grants and the tax concessions commonly referred to as "negative gearing" had fuelled housing prices and forced aspiring young buyers to the sidelines.

Mr Eslake, chief economist in Australia for Bank of America Merrill Lynch, makes the comments in a personal submission for the Senate Economics References Committee's inquiry into housing affordability.

"Although most Australians are ... physically well housed, it can no longer be said that we are, in general, affordably housed," he says.

"Cash handouts for first homebuyers have simply added to upward pressure on housing prices, enriching vendors."

Governments have been doling out grants to first-time homebuyers for almost half a century, but the home ownership rate has never been higher than in 1961, he says.

Mr Eslake calls for the effects of negative gearing - a common tax benefit used by investors - to be diluted. He argues that doing so will not lead to an oft-cited "landlord's strike".

Critics of the removal of negative gearing point to its short-lived abolition under the Hawke government in 1986, arguing it led to a surge in rental prices.

Mr Eslake says Real Estate Institute of Australia figures show rents only climbed significantly in Sydney and Perth, spurred in those cities by unusually low vacancy rates.

Australian Taxation Office figures collated by Mr Eslake show that the nation's 1.8 million landlords collectively lost more than $7.8 billion in net rent in 2010-11.

Those loss-making landlords would have cost the nation about $5 billion in lost revenue through their ability to offset the losses against other taxable income, he says.

Economists and central bankers have looked to the construction industry to provide much of the heavy lifting as the resources investment boom ends.

Mr Eslake's submission, called Australian Housing Policy: 50 Years of Failure, also claims that recent governments have been unable to supply a growing population with adequate housing stock.

From 2001-11, the submission claims, stock grew at a slower pace than the population - 15.2 per cent compared with 15.9 per cent - for the first time since the end of World War II.

"Average family sizes declined between the early 1960s and the early 1990s, implying that more dwellings are required to accommodate the same number of people," the submission says.

An ageing population and rise in family breakdowns are also fuelling the need for more homes, it adds.

Mr Eslake, also a member of the National Housing Supply Council, says money saved from the abolition of price-boosting policies could instead directly fund new homes or form an incentive for developers to increasingly promote their more affordable offerings.

He was unavailable for further comment yesterday.

A Senate spokeswoman said submissions, which can be made until March 25, were released once the committee had taken due time to consider them.

The committee will release its report on June 26.

That says it all, Bro.

It has become obvious that the entire focus of the government is to assist in the enrichment of those with and the impoverishment of those without.

SSDD.

Sir lastnail wrote on Jan 23^rd, 2014 at 10:23am:


says it all really .....

what about his point of getting rid of negative gearing and gimmicky first home buyers scams

what do you mean like giving tax concessions to owner occupiers instead of exclusively to house hoarders like they do here ?

wouldn't that be a crying shame if they followed the US down that path

Sir lastnail wrote on Jan 24^th, 2014 at 2:21pm:


I have no problem with that ..... petition for it, I'll be your first signature .. .