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The Affordability Problem

Housing affordability is very much related to debt for it is only through debt we can own a house to make our own home. So where is the debt? How is the debt able to be managed?

Note this article claims that the total household debt is equal to 123% of Australia’s total economy!

This is an extremely serious problem that must be dealt with and not ignored. The major political parties are not focused on dealing with this problem only the Christian Democratic Party can and will resolve this debt crisis BUT it is up to you to grant us the right to repair the economy!

  

It seems that a generation of young people are being locked out of the major property markets, and they are making a lot of noise about it. Many of Australia’s 4.4 million young adults, aged 23 to 40, seem to be postponing or cancelling plans to settle down and buy a home. The social and economic consequences of this for all Australians are considered to be serious in the short and long term.

The new young adults experience contrasts starkly with older baby boomers, currently aged from mid 50s to low 70s. These baby boomers battled through deep recessions with interest rates into the high teens, married earlier, travelled less and devoted their savings to buying and paying off their homes. They also benefited from a series of lucky breaks. Most of them bought their first family houses cheaply at a time of prosperity, free education, wages growth and high employment. They then watched their assets inflate and often used the equity to re-enter the market, this time as investors, compounding the dilemma for everyone still trying to get in on the ground floor.

The baby boomers are now entering retirement. For many of them, this is a relaxing reward for a life well lived, financed by what is left of the pension, superannuation, capital-gains-tax exemptions and negative gearing, and the security of a family home that is relatively empty and has appreciated far beyond anything they could have imagined in their youth.

By contrast, the new young adults are racked by insecurity, indecision, frustration and the stress of foreseeing a major portion of their life’s income will probably be spent on high rent – enriching passive investors, not themselves – or forcibly spent on compulsory superannuation. Household debt has never been higher. This is the new young adults’ future, unless there is a circuit breaker to change the direction.

Some proposed directions for a solution as seen on Facebook:

Emily Mexted How about a fast rail system to connect regional to metro so that people would be able to live regionally. It’s all well and good saying there are beautiful towns with affordable houses but where are the jobs? They’re in the cities!

Scott Clements As soon as rates inevitably go up we are going to see a huge rate of foreclosures. In turn that will erode house prices causing people to be lumped with huge debts and houses worth nothing.
2008 USA all over again.

Joe Magnay The reason that so many regional town have cheap housing is the same reason that young people tend to move to the cities to get a tertiary education and they stay there or go overseas to earn enough to pay for the education and raise a family or generally make a living. There is little work in the regional towns and those that exist are low paying and generally not reliable or seasonal. If the regional centers could be invigorated, the surrounding towns will also start to recover. The opposite is happening and many older parents are stuck out there with low value properties which prevents them from seeing their families who work in the city.

Mitchell Kennedy Is this why we haven’t progressed with a fast rail in the last 30 years? To protect current home owners / investors? Why is the housing market geared towards investors before young families Gladys Berejiklian Malcolm Turnbull ?

Deb Forster How long are we going to wait for the fast rail connections Emily mentioned? The rest of the western world has them. Why not us?

The solutions as I see it:

There are several issues that need urgent attention and they include the reduction of the international buyers in the market that forces the price up, the increase of the deposit needed to deliver greater security, better quality and faster public transport, decentralization of the work opportunities, reduction of fees and charges to get into the housing market, a more robust and diversified economy producing a greater variety of work opportunities and a careful and robust examination into banking practices that will deliver a more transparent and honest banking industry.

The details:

  • The reduction of international buyers in the market. The policy of having the international buyers in the housing market has been seen to cause many issues, not least the reduction of available accommodation as many of the premises owned by the international buyers are empty and to such an extent that the Federal Government is considering a tax on unoccupied premises that remain unoccupied for some time. It seems to me that we need to keep the Australian housing for Australian people and as such I will seek to disallow any further purchases of Australian real estate by non Australians. The housing currently owned by non Australians will need to be returned to Australian ownership via a sales over the next 10 years or for the current owners to seek Australian residency or citizenship. This will cause a downward pressure on the pricing of housing.
  • The amount of the deposit is very important as to the amount of equity into a major purchase. The practice of having almost or close to 100% housing value to in the debt owed to the property at the time of purchase. It seems to me that a 20% deposit for the purchase of a home is very reasonable and should assist in the equity % when interest rates fluctuate.  
  • The quality and the speed of public transport has a direct impact on the size of the housing market and therefore the actual purchase price. High quality and high speed transport will expand the market and therefore cause a further downward pressure on house prices. with such transport we could see many regional towns become new infrastructure hubs for government departments and business activities causing work and housing to become more attractive in the regional areas.
  • The establishment of high quality and highspeed transport will assist in meaningful decentralization that will be functional in a modern world. The Whitlam decentralization failure was due to poor infrastructure and extremely poor transport at the time. We have the capacity to improve on public transport with all the advances made in transport systems over the past 30 years. It is worth noting that the 3801 Newcastle Flyer (a steam train) holds the speed record for a passenger service between Newcastle and Sydney; THIS IS NOT ACCEPTABLE IN ANY CIRCUMSTANCES!!   I want to change this so will you give me your support to deliver real and meaningful fast public transport.
  • The fees and charges to get into housing is incredibly high and is a huge barrier to purchasing a home. Stamp duty on the purchase of the loan and on the house itself is a form of a double taxation and does amount to thousands of dollars. There is no need for these huge charges except for the raising of revenue which the government wants because of the insatiable desire to spend on things that are not affordable at the time. There is always a time to build something new and the government must exercise restraint in its expenditure to what can be reasonably be expected to be afforded at that time of the economic cycle. Excessive taxes and charges will stall the economy and divide the well off from the not so well off. It is better to plan a slow growth in economic activity so all will benefit from the growth as this will give meaningful ownership to government programs to the population soas to have less anti social attitudes developing as some feel that they are left behind.
  • A robust economy with a full diversification will eliminate many poverty traps that have developed as the successive governments have shut down the manufacturing industries by a variety of unfair market practices. The “globalization” and the “education boom” have collectively produced a large and growing group of unemployables due to the importation of inferior goods that are produced in third world countries in almost slave like conditions. Many know of the stories of the slave factories of Bangladesh and the many virtually slave conditions of the Chinese and the Indian workforces to produce so many things that we used to produce in Australia. The products are often throwaway products that consume the raw resources and are soon taken to land fill a few years later. This is claimed to be “international competition” and it is unreasonable, and immoral, that we demand that workers in this country get a fair wage yet we create trade agreements where we have workers paid a pittance to produce the things we used to produce in this country. The economy needs to embrace all Australians into a meaningful jobs. Today we find many graduates from our education centres unable to find a job as well as – BUT they have a huge education debt that can never be reasonably paid back to the government – THIS IS A FORM OF ENSLAVEMENT THAT IS UNWISE AND UNACCEPTABLE IN MY VIEW. The size of the debt problem is made far worse by the size of the education debt that each graduate has with their education degree – It is a millstone around the economic activity of the future and need to be gone asap. A balance economy creates employment for all its citizens and it is possible even in our modern world. I am willing to lead into this direction for only from here will home ownership and reasonable pricing of home be found.
  • The banking problem is one of the most difficult ones to tackle as the government sold off the Commonwealth Bank and internationalized our currency by the floating of the Australian Dollar on the exchange rate.This effectively removed the government management of the economy in so many ways and placed the international financial institutions in the box seat to control and to manipulate the Australian economy. It seems that the banks and financial institutions are a law unto themselves and they are driving the economy including the privatization programs. The drivers behind the privatization look for anything that has a high rate of activity where a small charge will generate huge revenue and it is only the financial institutions that can get hold of these soon to be privatized government activities. a small increase in the charges over time will rake in millions and the government will need to raise revenue from other areas to continue to have funds as the revenue source goes soon after the glow of the sale has gone as the revenue is spent. So the cycle of more community assets are sold as a short term means to raise needed government funds. The way forward is to remove the power of the banks over the economy by direct government involvement and this is possibly best achieved via the Reserve bank being launched as a trading bank to get some degree of meaningful competition into the market. The stopping of the privatization programs and the returning of many of the privatized enterprises back into the public hands. Strong banking regulations to manage the extent of the debt bubble before it bursts. This will be a full and detailed overhaul of the banking industry as we now know it but it will bring it back under the control of government regulators.

There is a pathway forward but it is a huge move in a different direction and to broaden the whole of the economy that will find resistance from the international bankers and financial institutions BUT WE, THE PEOPLE, MUST GAIN CONTROL OF THE ECONOMY AGAIN!  

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