The hidden key to housing affordability

Kevin:  We talk in the show a reasonable amount about housing affordability. In fact, last week in the show, I was talking to Nerida Conisbee about that in relation to what happened in Victoria. I want to get Margaret Lomas’s view on that in terms of how do we make housing more affordable? Is it really a big issue?

Margaret, thank you very much for joining us. How are you?

Margaret:  I’m good. It’s a very important subject to me. I obviously have children of my own, and you’ll probably even hear in the background from time to time, a baby. I’m on grandma duties today.

I’m watching them all struggling to get into the market and wanting to help as much as I can, but I think it’s very, very important that governments look at what they can do, and I, frankly, think they can do more.

Kevin:  There are two things, I guess. It’s getting people into housing but also making housing more affordable from a rental point of view, too. But let’s deal with buying a property. Do you think that the moves the Victorian government have made are good? Are they going to achieve good results, Margaret?

Margaret:  Let’s say they’re a start. I guess the biggest problem at the moment, really, is that each state has a different amount of grant, different rules around their grants, and what I’m seeing at the moment is that the states that need it the most have the worst grants available and the states that need it the least, because their housing isn’t unaffordable, have the best grants available.

I wonder if there’s a correlation there that having those grants available has also assisted to keep a lid on housing. I don’t know. There’s an argument for and against that. A lot of people think that first-home owner grants do nothing but boost prices, but I don’t know that we necessarily have empirical evidence to prove that.

Kevin:  In some states – let’s have a look at Queensland as an example – they’ve made the first-home owner grant applicable only for new homes, and I think sometimes that’s actually forcing young buyers to buy properties in areas where there’s no infrastructure or very little infrastructure anyway.

Margaret:  Agreed entirely. It’s actually every state now. Every state has now shifted over to only providing grants for new homes, and I think that’s very unfortunate because the moment someone buys a new home, it becomes a used home anyway, so the next first-home owner can’t buy it off them. Those people are buying those homes in areas that are otherwise affordable, but suddenly they’re not available for the next first-home owner because the grant excludes them, and I think that’s unfortunate.

Kevin:  I’ve also heard people talk about making boosts available for regional properties only, to get people out of more of the regional areas, but I think whenever you manipulate some of these grants to get people to do things that you want them to do and live in areas that you want them to live in, it’s the wrong way to go, Margaret.

Margaret:  I’m not sure what the whole outcome would be there or why they would even want to do that. Regional areas are already affordable, and it’s not the property prices that are stopping people moving there; it’s the infrastructure, the lifestyle, and the access to services.

The governments would be far better offering grants to government bodies and other people to actually build the right kind of infrastructure, even to private providers of things like childcare and sporting and other things like that, to make them go to those areas so that it’s more attractive to people that live there.

It’s not the house prices that are preventing people from going to the regions.

Kevin:  The Prime Minister has said that he believes the answer to housing affordability is more supply. We know it’s all about a supply-and-demand argument, but is it that simple, Margaret?

Margaret:  I think more supply is one thing, but the problem is supply isn’t going into the right places. We have a lot of areas that are oversupplied in housing and they’re just areas that people aren’t wanting to live in just yet. Eventually, people do feel like they can commute a lot further.

I always use Perth as a really, really good example. While people in Sydney are quite prepared to live on the Central Coast and travel what can be an hour and 45 minutes on the train to get to work, people who live in Perth, that’s inconceivable to them that they would do that. To them, anything longer than a 20- to 30-minute commute is just out of the question.

Now in 20 years’ time, that will all change, of course, but at the moment, the housing supply in Perth – the best supply and the oversupply – exists in those areas that are further than 30 minutes away, and therefore, people don’t want to buy them. They’re not boosting supply in the parts that they should do.

And places like Perth can easily do that because they have plenty of closer to the city areas where they still have houses sitting on 700-square-meter blocks and 1000-square-meter blocks, but the local councils refuse to change planning laws and allow people to subdivide into smaller blocks.

I think that’s a good start. If councils can recognize that they may be in areas that are commutable distance to the city and have a lot of people on very large blocks of land, then why not allow those people to begin to actually subdivide into smaller blocks and increase the supply that way?

Kevin:  Yes. You’re very right. Even in some of the outlying areas in many of the capital cities, we see houses on big blocks of land that could quite easily be subdivided.

Margaret:  Absolutely, but the government and the local governments just don’t want to do that.

Of course, the other problem there is that all of the levies and the charges that councils charge to subdivide prohibits a lot of people from going ahead with it. So let’s make that process easier – the process of subdivision easier.

I can think of dozens of people who have their own homes on big blocks of land and would only be too happy to add another dwelling to the black of it if it was easier to do so. Let’s make it easier. Let’s stop restricting those second dwellings to 60 square meters that people don’t want to have. Let’s allow them to chop off their backyards easily and cheaply and build the houses there.

And then let’s take it all one step further and think about things other than first-home owner grants to help those first-home owners – things like loan schemes that aren’t prohibitive. I’ve seen a lot of cheap loan schemes but they’re no good. They end up with people paying more than they borrowed at the end of the whole thing and going backwards.

Let’s think of different ways to deliver grants in a way that it won’t impact on the price of housing and it’ll really help people over the longer term rather than the short-term.

Kevin:  Always great talking to you, Margaret. We can catch Margaret every week, of course, on Sky TV on Property Success with Margaret Lomas. The channel I think is 602. Is that right?

Margaret:  602. That’s it.

Kevin:  Got it, okay. Margaret, lovely talking to you. Thank you for giving us your time. I’ll let you get back to your grandchild now. Is it a boy or…?

Margaret:  A little girl and she’s gorgeous.

Kevin:  They’re all gorgeous. Well done.

Margaret:  I’m just trying to teach her to say “granny” today, but it’s not working.

Kevin:  Okay. Well good luck. Let me know if you succeed.

Margaret:  I will. Thank you.

Kevin:  Thanks, Margaret. Bye.

Margaret:  Bye-bye.