Getting on the right side of public opinion - George Megalogenis at #NHCSydney

One of Australia’s most insightful political, economic and social commentators George Megalogenis, used his keynote address at the National Housing Conference to deliver a stimulating exploration of how community attitudes to housing affordability have been turned on their head, and flagged warnings of the social disruption that could be caused by high house prices should there be a downturn in the economy.

Whereas a decade ago it would have been unthinkable for a major party to call for a crackdown on negative gearing, now there is a real change in how voters in the Australian mortgage belt view high house prices. George believes that the impacts of the global financial crisis in 2007–08 have caused voters to be wary that high house prices are affecting their children’s ability to buy a home, either now or in the future. Indeed, the number one concern of Australian focus groups in 2016 was housing affordability.

...to avoid the political ramifications of wealth inequality across the country, governments should consider housing and infrastructure programs that encourage decentralisation to other Australian cities and regions.

The combination of Negative Gearing tax deductions and a discounted Capital Gains Tax (introduced in late 1999) caused house prices to increase substantially as significantly more investors entered into the market, however George argues this relentless growth has led to real risks for Australia’s financial system. He contemplates what the the best course of action is for government, should an economic downturn take place. One consideration is that investors in real estate, who made up 15.5 per cent of tax payers (i.e. 1 in 7 tax payers) in 2014–15, will need some form of government support to prevent their economic losses affecting the rest of the Australian economy. One proposed solution may be for government to provide a form of bail out for investors who are forced to sell (such as for those needing income for retirement). Such a bail out could take the form of a grant to help renters to buy the property, or even have properties bought to become some form of social housing.

The impact of current high levels of skilled migration has also led to concentrations of new migrants to the economically powerful cities of Sydney and Melbourne. George argues that, if Australia is to avoid the political ramifications of wealth inequality across the country, then governments should consider housing and infrastructure programs that encourage decentralisation to other Australian cities and regions.