What price a roof over their heads?

Consider this: if the combination of supply shortages, up front levies and red tape have conservatively added $100,000 to the cost of a new home, that additional cost by way of a larger mortgage is worth an extra $675 per month alone! ($100,000 at 6.5 per cent variable over 25 years). The total interest bill is over $100,000, plus the principal, over the life of the loan. If that money was directed instead into domestic consumption, would the economy be stronger and Australians more prosperous?

Limited economic growth is a further consequence that could derive from needlessly high house prices. For states like Queensland, for example, population growth has been driven not just by lifestyle seekers, but also by the lure of relatively lower cost housing and costs of living. That relative advantage has now eroded, interstate migration numbers have slowed (topped up for the present by international migrants) and - due to the slowdown in the building industry as public policy chokes new supply - new job creation has also slowed. Ironically, Queensland now trails the (more affordable) states of Tasmania and South Australia in terms of economic performance, according to this report by Commsec. (West Australia is also concerned - see here).

You could speculate forever on other possible consequences of maintaining this high price regime for housing via current public policy settings, but among the most worrying is that we are witnessing the creation of a new landed class structure in Australia. For Gen X and Baby Boomers, rising house prices have added equity to family balance sheets - which have been leveraged to acquire additional investment housing, often more than one. While this generation is building wealth through house price growth, the other generation is being denied that opportunity. They are becoming the rental generation, whose economic efforts will go in rents to the landed generation, whose wealth will rise further.

Australia has long held dear the ideal of a classless society, of equality of opportunity and ‘a fair go’. But are we now witnessing a new class structure, defined by those who own property (and quite a bit of it) and those who don’t? That this is occurring largely at the hands of Labor state governments who claim a charter of social equality, is just as worrying. And if we fail to remedy the problem now, what are the possible consequences of that new social division as we move forwards in time?