While the new housing schemes may be music to the ears of many who are keen to enter the market, a Charles Sturt expert warns of the risks, particularly to low and middle-income earners.
By Lecturer in History, Politics and Sociology in the Charles Sturt School of Social Work and Arts, Dr Oliver Villar.
Government schemes that attempt to attract people with low income and less capital to enter the property market should be viewed with caution.
Like previous first home-owner grant schemes, the proposed new first home guarantee scheme could be seen as another attempt to prop up property prices to ensure that money continues to be invested to avoid a property price collapse that would cause our banks to fail.
This is not a policy or partisan issue - it is systemic.
If the government was serious about making housing affordable, it would instead end negative gearing and wind back the capital gains tax discount to stop real estate speculation.
Correspondingly, property prices would likely tumble. However, it would facilitate increased home ownership.
Persuading low and middle-income earners into the property market
This is the same pattern where we see taxpayer solutions that supposedly target market problems - the risk is transferred to the public for private profit.
What the new scheme does is reduce the risk to banks in the event of a default.
Furthermore, it makes default more likely and debt a certainty because it persuades people with little capital (less than a five per cent deposit saved) who are financially unstable (low and fluctuating income) into the property market at prices they cannot afford.
This reflects an unstable system of capitalism, where value is dictated by greed and society is sold the myth of the ‘middle class’.
Increasingly, the ‘value’ of the property market is fictitious and so new entrants are required to stabilise it in the short-term. This is the result of Labor and Liberal government policies since the 1980s. The Hawke and Keating Labor government introduced negative gearing in 1985, and the Howard Liberal-National Coalition government introduced the 50 per cent capital gains tax discount in 1999.
The result is an American model where the public subsidises private interests when taxes could be going to public housing, health, education, and other social services that are in desperate need.
Contrary to popular belief, these are not radical ideas. It is classical liberalism.
The answer is affordable housing for people to live in, rather than ‘investment’ opportunities to generate more wealth for the already wealthy.
Building new homes, keeping interest rates low, controlling inflation and other ‘market solutions’ won’t make housing any cheaper either, whether you want to buy or need to rent. For the market to work at all, workers need secure jobs and higher wages to start with.
In 2016 and 2019, former Labor leader Bill Shorten lost both federal elections vowing to scrap negative gearing. There are few signs that Prime Minister Anthony Albanese will do anything to upset those powerful interests.
We are told by both sides of mainstream politics that ‘there is no other alternative’ and business must proceed as usual. It was not that long ago that we were also told that the banks were ‘too big to fail’.
But like all things social and economic policy-related, housing and real estate is no different, they are essentially political decisions.
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