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First home buyers: the forgotten people

By Ross Elliott - posted Tuesday, 20 August 2013


Sir Robert Menzies wrote his speech 'the forgotten people' about middle class Australia in 1942. Much of it remains relevant today, especially for the generation of new housing buyers who seem increasingly disregarded in public policy debates.

It occurred to me recently that with all the various lobby groups and government agencies involved in the planning and delivery of new housing, the needs of the actual homebuyer seems frequently overlooked or plain ignored.

The home builders have the HIA, general builders have the MBA, developers the UDIA, owners and developers the PCA, the planners have the PIA, architects have the AIA and so it goes. Each group lobbies for the interests of its members, not for home buyers. Home buyers themselves are largely without a voice. They are the new 'forgotten people' in a debate about government financing requirements, infrastructure deficits and industry capacity to pay.

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It's reached the point that, despite much hand wringing about the housing affordability issue in Australia, government discussion papers and industry responses to them frequently – it seems to me – overlook the end user. Affordability often doesn't rate a mention. Discussions about infrastructure levies, for example, seem to revolve around government claims that they haven't sufficient funds to scrap the levies while industry responses seem to revolve around their own financial difficulties posed by the levies.

But a $30,000 levy, for a young couple on a combined $70,000 per annum (for example) is a very significant amount of money. It's added to the cost of a new home, and they are asked to pay for it, or borrow to pay for it through their mortgage. This inescapable point is so widely overlooked in the many discussion papers that you begin to suspect it's deliberately not a focus. It would be a difficult position to justify if it was.

Then we had some recent debate about raising the rate of GST. Some industry groups support this. But as GST only applies to new housing (not established or second hand stock) such a move would only widen the gap in tax treatment which is heavily distorted by taxing new supply only. The GST on a new $400,000 home is $40,000. An increase to 15% would raise it to $60,000. A big $20,000 increase for the young home buyers. Big enough to write off their chances of entering the market with a new home. But unless I've missed it, proponents of raising the GST level have not commented on what this would do to new housing.

Ditto the ongoing debates about urban growth boundaries and the regulator's desire to limit choices for detached housing in favour of higher density models. The debate swirls around issues of planning ideology, environmentalism, and growth 'management' (a byword, in my book, for excessive control). Despite clear evidence of the price impacts of growth boundaries on the cost of new land for housing, the proponents simply disregard the financial impact on young home buyers.

In all of this, the hapless generation of new home buyers are without a voice. Many don't even know that up to 40% of the price of their new dream home where they'd like to start a family can be sheeted home to taxes introduced in just over a decade. They wouldn't even know that someone could buy a multi million dollar established home in an upmarket area and pay less tax than they are being asked to.

But onwards we plough, disregarding the irrevocable damage we are doing to society by reducing a generation's ability to buy and own their own home. The social and economic consequences of a generation of renters in their old age is something, it seems, we can all worry about in years to come. After this election certainly. And after the next one too probably. Let's wait until it's too late.

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There is no home buyers party at the coming federal election. Housing has barely rated a mention (Sydneysiders with existing stakes in the market, for example, are happy watching prices rise so why make it an issue?) But we have Katters and Greens and Palmers and a host of other minor parties, and the major parties also, and none of them, so far, seem to acknowledge the magnitude of this problem let alone are they ready to articulate meaningful and workable reforms that can actually make a difference for the forgotten people in this debate.

Menzies had it right when he said:

I do not believe that the real life of this nation is to be found either in great luxury hotels and the petty gossip of so-called fashionable suburbs, or in the officialdom of the organised masses. It is to be found in the homes of people who are nameless and unadvertised, and who, whatever their individual religious conviction or dogma, see in their children their greatest contribution to the immortality of their race. The home is the foundation of sanity and sobriety; it is the indispensable condition of continuity; its health determines the health of society as a whole.

I have mentioned homes material, homes human and homes spiritual. Let me take them in order. What do I mean by "homes material"?

The material home represents the concrete expression of the habits of frugality and saving "for a home of our own." Your advanced socialist may rave against private property even while he acquires it; but one of the best instincts in us is that which induces us to have one little piece of earth with a house and a garden which is ours; to which we can withdraw, in which we can be among our friends, into which no stranger may come against our will. If you consider it, you will see that if, as in the old saying, "the Englishman's home is his castle", it is this very fact that leads on to the conclusion that he who seeks to violate that law by violating the soil of England must be repelled and defeated.

National patriotism, in other words, inevitably springs from the instinct to defend and preserve our own homes.

Where is that patriotism now?

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About the Author

Ross Elliott is an industry consultant and business advisor, currently working with property economists Macroplan and engineers Calibre, among others.

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