Someone’s finally cottoned on to the fact that first home buyers being squeezed out of the housing market is going to cause trouble for the economy in the long run. And even better, they’ve proposed a pretty reasonable solution.
Independent national think-tank, the Committee for Economic Development of Australia, has released a sharp bit of perspective in its latest research report, The super challenge of retirement income policy, which examines the economic impacts of Australia’s ageing population and decreasing housing affordability.
“Home ownership rates continue to decline among younger households aged 25 to 44 years, partly due to a fall in housing affordability that hits first home buyers the hardest.
“This will have a flow on effect and the number of people retiring without the security of their own home will only increase.”
The chief concern for the Australian economy as a whole, and these non-home-owning individuals in particular, is that the twenty and thirty somethings of today will be exposed to a high-cost rental market and risk poverty in retirement.
But rather than just pointing and shouting like so many other property market pundits, CEDA has proposed a solution.
“As a longer-term measure, to help address declining home ownership rates among younger households, the government should consider allowing first home buyers access to their superannuation to help fund the purchase.”
While you could argue that this will increase competition and push prices further north, at least first home buyer’s would be able to access the up-front capital they need to compete with investors and start to address the asset gap between the rich and the poor.
Without this type of reform to address housing affordability, CEDA sees the asset inequality widening.
“Increasing income and wealth inequality are likely to mean that advantaged households will increasingly squeeze disadvantaged households out of property ownership.
“This is already happening in some markets – investors, who tend to have greater borrowing capacity than first home buyers, add to price pressures and squeeze out less advantaged first home buyers.”
While it’s not just young adult home ownership that’s fallen over the last twenty years, it is this age bracket where the gap has widened more significantly.
In the long run, lifting the left hand side of the chart is seen as essential to alleviating some of the burden the government faces in funding the pensions of millions of wrinkly Gen Y-ers, teh report explains.
“Housing makes a critical contribution to sustaining the living standards of older households who are income-poor but asset-rich in retirement. Hence, the challenge of how to ensure the living standards of those who are income-poor and asset-poor must start with housing.”
So, how about it Tony, you let us tap into our super to buy a house and we’ll try to take it easy on your coffers in retirement?