Kerry Bartlett (Macquarie, Liberal Party) Share this | Hansard source

It is self-evident that housing affordability depends on three factors: firstly, the prices of the houses themselves; secondly, interest rates and the cost of servicing a mortgage; and, thirdly, people’s incomes. If we look a little more closely at these in the context of the current debate—that is, the rhetoric and hyperbole emanating from those opposite—we can see what the facts are in the situation. The recent publication by the Housing Industry Association and the Institute of Public Affairs entitled The tragedy of planning: losing the great Australian dream sheds significant light on these three factors. Firstly, on housing prices, the report says:

According to the Demographia 2006 International Housing Affordability Survey, Sydney ranked seventh in the least affordable housing market from their study of 100 cities in North America, New Zealand, Australia and the United Kingdom.

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The key cause of this disparity is planning constraints that have reduced the availability of land for housing, and house-tax measures often in the guise of development contributions.

The key factors in affordability are the restraints on planning and the house tax contributions forced on buyers by state governments. As a result of planning constraints and taxes and charges, land prices have risen dramatically in Sydney in the last 30 years—sevenfold, from an average of $59,000 a block to $461,000 a block—compared to a very modest increase in building costs of just four per cent in real terms over that time. As a result, the land component of a new house and land package in Western Sydney has risen from 33 per cent to 78 per cent in just 30 years, far higher than in other capital cities. The report says:

These trends—

that is, land price costs, land release issues and taxes and charges—

are at the heart of the blow-out of Australian housing affordability.

The report goes on to show, quoting Demographia again, that the direct and indirect tax charges and regulatory charges add up to $150,000 for a block of land in Sydney.

The second issue—and we have heard a lot about this from the other side—is that interest rates do affect the cost of servicing a mortgage. But the point made by this report is that they add only at the margins to the cost of housing. The report says:

The vast dispersion of prices and of price trends provides unassailable empirical evidence that price increases are not due to some general phenomenal-like shifts in interest rates.

The outgoing Governor of the Reserve Bank has reinforced the point that the fundamental issue is the cost of land and state government charges. But it is true that, around the edges, interest rates do make some difference. They are now at 7.8 per cent. Just imagine if interest rates were at the levels which prevailed during Labor’s 13 years in government. Just imagine what it would do to the affordability of land and houses if, instead of the current 7.8 per cent, interest rates were at the 12.75 per cent they averaged over those 13 years of ‘hard Labor’. That is an extra 4.95 per cent. On an average mortgage of around $200,000, it would mean a cost of an extra $825 a month if Labor’s interest rates prevailed rather than the low interest rate climate that we have at the moment.

The third factor in housing affordability is the level of people’s incomes and their ability to service mortgages. Again I make the point: compare the levels of incomes now to what they were under Labor. Real wages have risen in this country by 16.8 per cent over the last 10 years, compared to a miserable rise of 1.2 per cent in Labor’s 13 years and compared to a decline in minimum real wages under Labor. Housing affordability was far less under Labor because wages did not rise. At least under this government we have seen a rise in real wages.

The point is this: fundamental to housing affordability is the failure of state governments in their planning regimes and in their heavy imposts of taxes and charges on land. Secondly, if interest rates were at the level that prevailed during Labor’s 13 years it would be even more difficult to afford a home. Thirdly, if wages were not rising as fast as they are now then it would be even more difficult. This government is doing its part. The state governments are failing the homebuyers of this country.

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