Australia tries to fix its housing crisis. Will it work?

{"text":[[{"start":6.9,"text":"Australia has put itself at the centre of a great global experiment: how to create a fair housing market.  "}],[{"start":13.65,"text":"For generations, politicians have vowed to deliver the “great Australian dream” for as many voters as they could — namely ownership of a suburban house with a garden and a swimming pool. But with house prices in Sydney and Melbourne among the most expensive in the world, many argue the dream is broken, especially for the country’s youth. "}],[{"start":35.1,"text":"Prime Minister Anthony Albanese’s government is now unwinding some of the tax incentives that have contributed to a 400 per cent rise in prices since 1999. "}],[{"start":45.8,"text":"His reforms have been billed as the most ambitious in a quarter of a century, a chance to bring back intergenerational fairness and a canny pitch for younger voters. Critics warn it could bring one of the world’s most expensive housing markets crashing down to earth. "}],[{"start":60.949999999999996,"text":"The country is now bracing for potentially its worst housing market correction in 40 years, analysts say, as the impact of the tax reform combines with higher interest rates and elevated inflation to cool demand."}],[{"start":73.85,"text":"Cotality, the property research company, said that house values “flatlined” in May with Sydney, down 0.9 per cent, and Melbourne, down 0.8 per cent, leading the downturn. The volume of sales was also tracking 2.2 per cent lower than a year ago with the largest drop in estimated sales in Sydney at 17 per cent, according to the company. The median house price in Sydney is A$1.3mn ($930,000), according to Cotality. "}],[{"start":101.05,"text":"Morgan Stanley economists projected that house prices could fall by 10 per cent — much higher than Treasury estimates — as the investment model of higher leverage, cash flow losses and large expected capital gains has been “meaningfully changed”. "}],[{"start":116.3,"text":"“Lower expected returns, as well as more constrained borrowing capacity, will cause investor demand to drop sharply and require a higher rental yield to be compensated. We expect this adjustment to occur primarily through price,” they wrote in a note. "}],[{"start":130.9,"text":"Some of the recent weakness in house prices can be attributed to buyer confusion about what the new rules mean, one property agent said. "}],[{"start":138.8,"text":"Treasurer Jim Chalmers blamed the “distorted tax system” for pushing home ownership out of reach for many Australians as he outlined the sweeping changes in last month’s Budget."}],[{"start":null,"text":"

"}],[{"start":149.4,"text":"The Budget proposes limiting negative gearing — where losses generated by an investment property can be deducted against income tax — to new developments. The 50 per cent discount on capital gains tax introduced in 1999 will be replaced with an indexation method that adjusts for inflation and includes a 30 per cent minimum tax rate. A 30 per cent minimum tax rate on discretionary trusts has also been proposed."}],[{"start":174.70000000000002,"text":"Aruna Sathanapally, chief executive of the Grattan Institute think-tank, welcomed the changes, arguing that the tax system “has driven perverse incentives and unprincipled outcomes”. "}],[{"start":186.45000000000002,"text":"“This Budget starts to tilt the balance in favour of younger, working Australians trying to buy their first home.”"}],[{"start":193.15,"text":"Some business leaders and political opponents argue that the tax changes will drive rents higher, while depriving younger investors of opportunities. Some even say that the reforms will have limited impact on the housing market unless more houses are built."}],[{"start":null,"text":""}],[{"start":208.1,"text":"Recent Treasury estimates show that the tax changes could reduce private supply by 35,000 houses over the next decade due to depressed investment. The government expects this loss to be offset by a new A$2bn stimulus fund for infrastructure including sewers aimed at supporting the construction of 65,000 homes, on top of the 1.2mn planned by the end of the decade."}],[{"start":234.2,"text":"The government has maintained tax incentives on new builds in order to encourage more investment in housing supply. It has also moved to “grandfather” the tax changes, meaning that existing property investments will be exempt."}],[{"start":247.2,"text":"Sunny Nguyen, head of Australian economics with Moody’s, said that the government’s attempt to divert investment towards new builds was “clever in principle”, but it relied on expanding supply at the same time that it squeezed investor demand by slashing incentives. “That bet has not been a winning one historically,” she said."}],[{"start":266.4,"text":"Tim Reardon, chief economist with the Housing Industry Association, a trade body, said: “Australia is trying to squeeze 11mn households into 10mn homes . . . It doesn’t matter how you adjust the share of ‘renters vs owners’, the result remains the same, we don’t have enough homes.”"}],[{"start":null,"text":""}],[{"start":285.79999999999995,"text":"A key driver for Albanese is the desire to rebalance intergenerational fairness. "}],[{"start":291.09999999999997,"text":"The changes could also be cast as a calculated political risk to appeal to Australia’s growing number of younger voters, said Tim Harcourt, an economist with the University of Technology Sydney. "}],[{"start":302.7,"text":"Alex Rossiter, 19, a forensic science student at the University of Technology Sydney, remembers being told by teachers that “there was a high probability that we [the students] would never have a chance to own a house."}],[{"start":315.15,"text":"“This change to the Budget might be disappointing to a lot of older residents of Australia but to the younger ones growing up assuming that we’ll never own property, it feels like a good step in the right direction.”"}],[{"start":327,"text":"Chrishelle Puvinayagam, a 20-year-old who is studying creative writing and linguistics at the University of New South Wales, remains unconvinced. “A politician’s art is lying,” she said. “It’s just so insane something considered a basic human right is so hard to acquire. Something needs to be done.”"}],[{"start":351.8,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1781071945_9096.mp3"}