Opinion: Scott Farquhar, a tech billionaire, smashed Australia’s real estate records when he paid A$73 million for Elaine, the crumbling 160-year-old mansion on Sydney Harbour, long the fortress of the Fairfax publishing family.
He never moved in, leaving the seven-bedroom, Victorian nod to grandeur empty for nearly seven years – until last month, when the 44-year-old unloaded it for $130m (NZ$144m). That’s nearly $60m for doing nothing much.
Days later, a Melbourne dad paid $680,000 for a cottage – buying it for his school-aged daughter, fearing she wouldn’t be able to afford a home in years to come.
Both illustrate the extremes of Australia’s housing market; investors see buying houses as a sure way to riches as others fret that home ownership is drifting out of reach.
The latter is real; these days, the median Australian house price of around $802,000 equates to about eight times an Australian’s average yearly earnings. It’s cold comfort for young people trying to buy a home today to know that when their parents acquired their first home, the price was likely to be only about 3.5 times their income.
In Sydney, it’s far worse. The median house price is above S1.6m – about 16 times average annual incomes.
Disappearing housing affordability is a frequent topic in my Sydney home, where we lived through our elder daughter writing her honours economics thesis: How Important is the Bank of Mum and Dad? (Answer: more important than ever.)
Though she is resistant, we hope she and her sister will join the 60% of first-home buyers in Australia helped by their parents. If they accept, they will add to a class divide: those who get into a home of their own as parental wealth is passed down and those who have no such access and face a lifetime of renting.
The reasons behind the rapid acceleration in property prices are many, but common to both Australia and New Zealand are surging migration influxes and the failure of well-intentioned governments to deliver on ambitious home-building targets.
And in Australia at least, investors are encouraged to pile into property because of generous tax breaks – especially negative gearing, which allows those who borrow to buy homes to use their losses to slash their tax. Hence, investor demand pushes up prices of houses which are now seen as big wealth creators.
Unsurprisingly, 20% of all Australian taxpayers own an investment property. Meanwhile, the weekend queues of young and not so young outside available rentals – many resigned to never owning a home – grow longer.
Those who argue tax breaks enlarge the rental market need to explain why chronic housing shortages persist.
Alan Kohler, the Australian Broadcasting Corporation’s endearingly rumpled and avuncular finance commentator – also a media entrepreneur worth millions – last month released a tight, punchy book on Australia’s housing mess called The Great Divide.
In one stark paragraph he captured what most know but don’t say: Everybody involved in this game – homeowners, banks, property developers and politicians – want house prices to rise for their own reasons. Renters don’t stand a chance.
A reckoning is coming. The Australian Greens, already with 15 MPs in the national parliament, are riding a wave of support for radical changes that include a rent freeze, a national landlord watchdog, mass building of public housing and ending investor tax breaks.
Polls show the nation’s eight million renters are listening. With Labor PM Anthony Albanese’s government likely to be forced into a minority government after next year’s election, the house of cards may well be in Green hands.
