Quote of the Day, 10/6/2015.

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Wednesday’s Quote of the Day belongs to the Australian Treasurer, Joe Hockey. The XYZ is quoting his full response to two questions from a journalist yesterday, regarding housing affordability in Sydney, courtesy of Chris Kenny in The Australian.image

“Question: Treasurer do you accept that housing in Sydney is unaffordable and the only way we’re going to make it affordable is if real house prices in real terms actually fall over the near term?

Treasurer: No. Look, if housing were unaffordable in Sydney, no one would be buying it. People are purchasing housing in Sydney, it’s expensive. As a multiple of average weekly earnings it is expensive, it’s an expensive city to live in. It’s my home city, it’s an expensive city. But, having said that, you know a lot of people would much rather have their homes go up in value than fall in value. Why? Because when you take out a mortgage, the mortgage is against the assessed value of that particular point in time, whatever’s leftover is your equity in the property. If your equity builds in the property not only is that to your financial benefit, but it also gives you the opportunity to borrow against that if you choose to do so for a small business. A lot of small businesspeople are borrowing against the equity in their homes in order to start up their business or build their business. Now, to have increasing equity in a home is a good thing, that’s a very good thing. Interest rates are at record lows. So if property is proving unaffordable for people with interest rates at record lows, then they should think carefully about how much they really can borrow, because you should always plan on in this situation interest rates potentially going up over the long term. So, you’ve got to be careful, it is a big financial risk to buy your own home. We want to make it easier. There are a suite of initiatives we have in place in regard to that, but most obviously, the best way to address inflated house prices in Sydney is to build more properties, build more properties.

Question: You say that housing is affordable, but what about for first home buyers who can’t get on the property ladder, those people that don’t have access to equity in other properties?

Treasurer: Well there are a range of incentives that have been put in place by state governments and others in relation to first home buyers. The starting point for a first homebuyer is to get a good job that pays good money. If you’ve got a good job and it pays good money and you have security in relation to that job, then you can go to the bank and you can borrow money and that’s readily affordable. More affordable than ever to borrow money for a first home now than it has ever been. But, the response for first home buyers is to build more properties. I know, it’s a difficult concept for some to get their heads around, supply and demand, but it’s not that complicated. If you increase supply to meet the demand, then obviously you won’t get the growth in property prices that you may have thought if you have less supply.”

Chris Kenny’s article on the distortion of these comments can be found below.

http://www.theaustralian.com.au/opinion/columnists/joe-hockeys-housing-comments-not-silly-enough-for-media-outrage/story-fn8qlm5e-1227391045809

  • Chooie

    How can we build more houses close to where most of the new jobs are being created in our inner cities? It seems like the residents of those suburbs whether they vote Labor, Liberal or Greens all agree that they don’t want any “inappropriate” development which will change the character of their precious suburbs. Are there any governments who are willing to take on the NIMBYs on a large enough scale to have an impact?

  • Don

    1. Better and lower cost transport in the hinterland would enable industry to function economically away from the city centres.
    2. Movement of employment opportunity would lead to labour also moving to the area.
    3. This would lead to a) less pressure on city housing shortage
    b) labour not needing to travel long distances to employment
    c) Improved conditions in the satellite towns
    d) vastly reduced pressure on rail, road systems in the city.
    The failure of the Orange attempt was partially due to the cost of transport and mailing. One firm found it more cost effective to employ a driver and vehicle to drive to Sydney with office communications than to use the PMG!
    The use of email (and particularly broadband as originally envisaged) has minimised that cost.
    Surely it is time for Australia to look beyond the coastline, and to put the necessary infrastructure in place to utilise other vast areas? The technology is either already available, or we should be working on developing it lieu of having childish cat fights in Canberra between allegedly mature thinking individuals who apparently have developed beyond childish behaviour.

  • Well put Don, speaking as someone who grew up spending a lot of time in regional Victoria – there’s some great work that could be done without massive cost.
    One of my interests is education, and observing the practices in regional Victoria and regional Queensland it’s clear that we have failed to really think for ourselves and innovate (something Australian’s are brilliant at when given the opportunity) to manage the vast distances that we currently require students to travel.

    Many of the towns I visit do not have a high school (or sometimes even primary school) but a number of these towns DO have current and well-equipped libraries. I found myself wondering – why don’t we stagger the children’s attendance at school (say attending on Mon, Wed, Fri) and link up with the classroom teacher to provide a day’s worth of homework for the other days (say Tues & Thurs).

    On those days, the children could be sent to the local library and we could hire one teacher to meet the (say 8 or 10) local students and effectively tutor them through their day’s work. The children are in an up to date library, ready access to books, internet and other resources and the library-tutor teacher would have copies of the classroom teacher’s units and outcomes. – It wouldn’t be difficult to set up & could be implemented for the cost of one teacher per library.
    (The same idea could also be worked into tertiary education, potentially curbing the ‘brain-drain’ where students move to larger cities to study)

    The point is – we face issues of distance that few other countries have (Canada may be another one) – but this doesn’t need to be a roadblock to flourishing regional and rural communities, as many of the challenges faced are very tackle-able.