With each passing week, the rhetoric on housing issues becomes less and less rational. On topics such as affordability and negative gearing, we have something akin to a form of mass hysteria. Apparently sensible people are making statements which, years from now, will cause them great embarrassment when they look back.
With the media we have in Australia, it’s almost impossible to have a rational debate on any subject. Media runs with its pre-conceived story lines and the only people who get heard are those willing to make outlandish comments that fit the ordained theme – such as, the Great Australian Dream is dead or negative-geared property owners are all rich bastards being subsidised by the taxation system or there’s a bubble, whatever that means.
Attention-seekers like economists know how to grab a bit of limelight – pander to media’s obsession with its pre-determined headlines, all of them based around Sydney’s property prices.
The great peculiarity of this “debate”, for lack of a better word, is that it’s happening when we don’t have a property boom or a national affordability problem. We have only one major city with boom-time price growth (although tame relative to 2002-2003).
If that one city was Perth or Adelaide, we wouldn’t be having this discussion. Media is all agog about it because the one elevated city market is Sydney and we have a hopelessly Sydney-centric media.
Around 20 million Australians live outside Sydney and they’re all watching this runaway hysteria about real estate with mounting bemusement.
It’s difficult for people in Perth and Hobart, where markets are going backwards, to relate to the notion that they need to accept lending restrictions because Sydney allegedly has a problem.
In Darwin, where vacancies are high, rents have dropped 5% in the past year and apartment prices are down 4%, people are wondering what the fuss is all about.
And in Canberra, which is producing similar statistics to Darwin, they must be scratching their heads at the panic that’s driving commentary three hours up the road in Sydney.
One of the absurdities of the affordability “debate” is that people keep referring to the Sydney median price and how first-time buyers can’t afford it. Sydney’s median is too high for a first-home buyer, therefore Australia has an affordability crisis.
The latest is serial publicity seeker and failed politician Graham Richardson, who is sadly typical of electronic media celebrities – a big ego, a loud voice and zero knowledge of important subjects.
His real estate rant on Sky News this week was a cacophony of misinformation. He said “the mean” dwelling in Sydney cost “a million dollars”, when the true figure is $752,000. He said this was “completely and utterly out of the reach of the new player”. But first-time buyers don’t buy at the median price – they buy below the median price, in Sydney and everywhere else.
A median price of $752,000 means half of all sales are below that figure – and in many Sydney locations it’s a lot below that figure. The No.1 most popular suburb in Sydney for buyers of dwellings is Blacktown (the suburb) – close to 1,000 homes changed hands there in the past 12 months, at a median price for $385,000 for apartments and $535,000 for houses (which means half of all sales were lower than those figures). Blacktown (the municipality) is also the No.1 LGA in NSW for population growth and the No.1 venue for first-home buyers.
There are hundreds of similar examples across the Sydney metropolitan area. So Richardson’s throwaway line that “it’s a grim future” for buyers in Sydney is nothing more than sound-byte generation from a pointless talking head.
He did mention that it wasn’t so bad elsewhere in Australia (a brief acknowledgment there is life in Australia beyond Sydney) and he mentioned Brisbane. He said prices were okay there because “there’s been no increase for years.” Again, wrong. But, then, being wrong in a loud voice is how “Richo” makes his way in the world. Sad.
Meanwhile, some attention-seeking behaviour of The Greens has added to the morass that is real estate coverage.
The Greens can be competent advocates of important issues like environment (though less so since Bob Brown retired) but they will never be serious contenders for government while they remain economically illiterate. Their latest clanger is the claim that scrapping negative gearing would raise $42 billion for government over 10 years. It would do nothing of the sort.
They’ve misunderstood the budget impacts, even without considering the fact that state and federal budgets would be losers if negative gearing was scrapped and people stopped buying investment properties, because of the lost revenue in stamp duty, capital gains tax and land tax.
The impact on rentals, for people who are unable to buy homes, would be alarming, as it was in the 1980s when negative gearing was (briefly) disallowed.
But the nation overall and the federal budget long-term would be the biggest losers, because if people aren’t investing to fund their retirement years, the nation has to fund them with pensions – and with our ageing population and the fragile state of the federal budget, that’s not sustainable.
The Greens have characterised negative gearing as low-income taxpayers subsidizing rich people – and that is simply dishonest. Three-quarters of people who own investment properties are average income earners who own just one property.
Most of them believe that investing for their retirement is doing the right thing by the nation. In condemning them with this poorly-considered and downright deceitful announcement, the Greens are making a serious error of judgment.
This article originally appeared on Property Observer.