Treasurer Scott Morrison has seized on a new report that shows house prices in Sydney and Melbourne are slowing to claim regulatory measures to easy Australia’s housing affordability crisis are already working.
Ahead of next week’s budget he has signalled that would-be first home buyers are likely to receive some assistance to buy a house, while also confirming the government will demand better “value” from the university sector for the funding provided by government.
Better days are ahead: ScoMo
The Treasurer has touched on debt, wages growth and housing affordability ahead of the Federal budget while Labor has its own ideas on getting back to surplus.
Mr Morrison welcomed a report from property researcher Core Logic showing that Sydney’s house prices fell by 0.04 per cent over April, while Melbourne grew by just 0.5 per cent, half its usual rate. Nationally, it was the lowest month-on-month price rise for capital city dwellings since December 2015.
“The two hottest housing markets in the nation have shown signs of slowing down in April,” Head of CoreLogic Research Tim Lawless said. “[But] we need to be cautious in calling a peak in the market after only one month of soft results.”
Treasurer Scott Morrison says the government’s scalpel approach to housing affordability has been working. Photo: Andrew Meares
In a separate report released on Monday, UBS said it was “ringing the bell” on the Australian property market. “We are calling the top,” said economist George Tharenou.
“So while the historical trigger for a housing downturn of Reserve Bank rate hikes is still missing, mortgage rates are rising and sentiment to home buying has collapsed to a record low,” said Mr Tharenou. “We are now calling the top of the cycle, but stick to our forecasts for commencements to correct but not collapse in 2017.”
Speaking outside Treasury where he will be based for the next week, Mr Morrison said he had taken particular note of the apartment market, which “had begun to turn”.
“We have been careful with the regulatory approach using that scalpel, not Labor’s chainsaw, because we know that if you take that other approach, you are at great risk of causing the sort of housing shock that would have real negative economic consequences for Australian families,” he said.
Treasurer Scott Morrison held a media conference before moving into the Treasury building to prepare the Budget in Canberra Photo: Andrew Meares
The government is understood to be putting together a number of housing affordability measures, including an affordable housing finance corporation and another measure that could see first home buyers allowed to divert some pre-tax income into a superannuation-style deposit-saver accounts that would be lightly taxed or matched with government contribution.
Asked directly if an economic case could be made for offering tax breaks to first home buyers, Mr Morrison said that first home buyers locked out of the market were competing with lower income earners, which added extra pressure to rental market.
“If you think about the housing market as a spectrum, when a first home buyer can’t get into the housing market, where do you think they are? They’re in the rental market or staying at mum and dad’s,” he said.
“If they’re in the rental market, guess who they are competing with in that rental market? People on lower incomes, where you have vacancy rates for rental stock in this country for 2 per cent or less. That puts even more pressure on those for whom the private rental market will be what they only ever know.”
“I hate to see families fall apart because of economic and financial pressures. As I’ve been framing this budget, I’ve had them very much in my mind.”
At the same time, the Turnbull government appears set to slash university funding by hundreds of millions of dollars in the May budget, while hiking student fees and requiring graduates to pay back their loans faster.
Mr Morrison accused universities of profiting from taxpayer dollars on Monday and signalled the government was preparing to pose new changes to the sector’s funding model.
“The figures being released today is funding growth has been 15 per cent, costs have been growing at 9.5 per cent, there is the effective profit equivalent of 6 per cent for these institutions but for businesses at large,” he said.
“I think those three figures tell you something about the capacity, I think, for the sector to deliver better value, even better value, for the students.”