Housing affordability may be the number one concern for many in the electorate during this Federal election, but the issue hasn’t been getting much airplay during the campaign.
According to a news.com.au interactive poll, nearly 30 per cent of the 11,000 participants said the most burning issue in the election was housing affordability.
And yet there has been relatively little said on the subject by either party.
What has been announced?
In Tony Abbott’s campaign launch in Brisbane, there was no mention of housing affordability or interest rates.
Labor Housing Minister Tanya Plibersek has announced a Housing Affordability Fund which will support 76 projects across Australia. The aim is to reduce the cost of 14,500 new homes by an average of $18,000 and the cost of a further 380,000 through local planning reforms.
Labor also plans to introduce Building Better Regional Cities which will deliver an additional 15,000 new affordable homes for purchase over the next three years. This will be achieved by making $200 million available to local councils in regional cities to help deliver more affordable homes.
Both Julia Gillard and Abbott have pledged to make housing more affordable in Darwin. Abbott has promised to offer up 100 vacant Defence houses for sale while Gillard has pledged to build 1200 new affordable rental houses in the Territory.
John Edwards, head of research at Residex attributes much of the silence on housing policy to the fact that both parties have a common platform so there is no need to comment.
One issue that has been discussed during this election is the level of migration. The proposed cuts by both parties mean that demand for housing will dampen over time and, as a result, keep a lid on prices. However, it could also result in a downturn in the building sector.
What about Interest Rates?
Interest rates are more the domain of the Reserve Bank – and to a lesser extent the individual commercial banks – than political party policy.
Movements in interest rates are usually reliant on the state of the economy. Strong economic activity leads to higher demand for labour. This keeps the level of unemployment low but can also result in higher wages that then translate to higher inflation. Once inflation moves out of the 2-3 per cent band, the Reserve Bank then usually moves to lift rates to keep a cap on the economy.
Investment adviser and media commentator Scott Pape makes the point that neither party has control over another key influencer of interest rates, and that is the increase in rates offshore.
“Banks may increase rates independent of the Reserve Bank as funding costs overseas are going up,” says Pape.
At the same time, it is becoming clear that the heat is coming out of the housing market. The latest housing finance figures, which are seen as a leading indicator on the outlook for property, were lower in June, falling for the eighth time in nine months to a nine-year low of 46,420 commitments.
Regardless of which party wins the August 21st election, the future for property will depend much more on the performance of the economy going forward and what both the Reserve Bank and the commercial banks do in terms of interest rates.