John Howard (Bennelong, Liberal Party, Prime Minister) Share this | Hansard source

I do not have the exact figures at my disposal, but it is true that housing affordability has declined. I am perfectly aware of that and I do not dispute it. It is a cause of concern to me and to the government. I would offer the view that it would have declined even more sharply if interest rates were 17 per cent. On the subject of housing affordability, let me say to the member for Sydney that yesterday when the HIA released its housing affordability statistics a number of things were said. The Managing Director of the Housing Industry Association, Dr Silberberg, said that the figures released yesterday show all the signs of structural supply constraints. An article in the Herald Sun of 30 May reports that the Victorian executive director of the Housing Industry Association, Ms Caroline Lawrey, welcomed an improvement in home affordability in Melbourne and made the following comments—and I quote from the article:

Ms Lawrey said the slight quarterly improvement was thanks to Melbourne’s land supply, as well as recently steady interest rates, and a cut in stamp duty for Victoria’s first-time buyers.

She went on to say—and I think this goes to the core of the issue, if the member for Sydney is really interested in the affordability of housing for young Australians:

There really needs to be more collaboration between all levels of government, not only to keep interest rates stable, but also to reduce red tape and other fees and charges first-time buyers face.

I could go on by pointing out to the House that the Third Annual Demographia International Housing Affordability Survey released in January 2007 said that the experience in Australia shows as follows:

Land prices have skyrocketed, while the price of building houses has risen only modestly in real terms.

Let me say that again:

Land prices have skyrocketed, while the price of building houses has risen only modestly in real terms.

It continues:

From 1993 to 2006, 88 percent of the combined cost of new houses and land has been attributable to inflation of land prices and only 12 percent to inflation in house building costs.

Once again I remind the member for Sydney of an exchange between the member for Rankin and the former Governor of the Reserve Bank in the House of Representatives economics committee on 18 August. Dr Emerson said:

I guess that is the question: are they—

mortgage interest payments—

high by historical standards?

And this is what Macfarlane had to say:

They are. That is caused more than 100 per cent by the fact that house prices have gone up, not because of interest rates going up. Interest rates are lower than they were 10 years ago and are obviously lower than they were 15 years ago.

Dr EMERSON—But affordability is no different?

Mr Macfarlane—The story is all about house prices. The story is not about interest rates.

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