Tim Lawless offers up his own ideas on improved affordability

Following on from the release of the final housing affordability inquiry report from the House of Representatives standing committee on tax and revenue, CoreLogic research director Tim Lawless has commended the broad scope of the House of Representatives standing committee on tax and revenue report.

“It is encouraging to see the report covering both supply and demand side factors, as well as addressing policy positions involving taxes, funding, developer fees and administrational inefficiencies,” said Mr Lawless.

Now that the results have been released, the research director opined that the next steps would be towards the evaluation and implementation of the recommendations, which, he admitted, could spark a lively discourse among policymakers and stakeholders.

To start the ball rolling, here’s Mr Lawless’ take on how several of the recommendations could be implemented with success:

1. Increase housing density along transport spines

Commenting on the recommendation to increase the volume of houses along transport networks, Mr Lawless explained: 

“Higher density housing is generally more affordable relative to lower density options, and positioning larger populations along key transport spines, such as the rail network, busways or arterial roads, ensures infrastructure utilisation is maximised.”

He cited Sydney’s SA2 regions along the train line and within 20 kilometres of the CBD as an example, where the average population density has increased from 3,791 people per square kilometre to 4,069 people per square kilometre.

Digging deeper into data, he noted that there are still suburbs with a low density, such as Turramurra (999 people per square kilometre), Wahroonga (East) – Warrawee (1,388 people per square kilometre), and Pennant Hills – Cheltenham (1,662 people per square kilometre), that could be optimised for housing use.

Anticipating local opposition for the scheme, Mr Lawless brought up offering “rewards” as incentives, like improving local amenities and convenience for residents, and also implementing measures to protect the character of housing for medium- to high-density developments.

2. Adjust stamp duty policies

Persuading state governments to change their stamp duty policies could be challenging, Mr Lawless acknowledged, since it contributes a considerable amount to the state revenue.

Stamp duty on conveyances accounted for 18.1 per cent of all state and local government revenue in the 2019-20 fiscal year, Mr Lawless noted – and this figure could possibly have risen significantly since then due to rising home prices and market activity.

Citing NSW as an example, Mr Lawless said stamp duty thresholds are adjusted each year in accordance with changes in the Sydney consumer price index.

“Over the past 10 years, Sydney’s CPI has increased by a total of 21.8 per cent while housing values have more than doubled, up 109.5 per cent over the same period. 

“The result is a significant amount of bracket creep that has pushed roughly half of Sydney dwelling sales over the past year into the highest stamp duty bracket where home buyers are lumped with a minimum of $42,240 plus $5.50 for every $100 over the upper threshold amount of $1,043,000 Sydney consumer price index,” he expounded.

Only 11 per cent of Sydney residences sold for $1 million or more 10 years ago.

The NSW government has already launched a review of stamp duty reform, which will likely entail a shift away from stamp duty to perpetual land tax.

3. Allow first home buyers to use superannuation as home loan collateral

With the most significant hurdle to acquiring a property being the amount of time taken to actually save for a deposit, Mr Lawless does believe that having access to superannuation as security could shorten the time it takes to save for a deposit.

Aussies over 30 years old have an average of $35,000 in their superannuation, with the amount saved increasing with age.

“Although that amount wouldn’t come close to covering a 20 per cent deposit in most cities, it would provide some first home buyers with a substantial head start in accessing the market,” he noted.

However, the research director was quick to point out that there are numerous risks associated with this scheme, such as boosting housing demand and values, as well as benefiting only those from higher-income groups.

To mitigate these risks, Mr Lawless suggested that aside from giving the housing supply a lift, the superannuation scheme could be made more equitable by adding “income caps or a maximum on the value that can be used as collateral”.

He also underscored home ownership as a crucial component of retirement wealth, as previously highlighted by the federal government’s Retirement Income Review. He said: “the home is the most important component of voluntary savings and is an important factor influencing retirement outcomes and how people feel about retirement” and that “the family home is an underutilised source to support living standards in retirement”.

Overall, Mr Lawless has welcomed the fact that the report did not recommend any further demand-side subsidies or incentives, which have historically pushed up demand.

“The recommendations from this latest report will, at the very least, provide a framework for discussion and dialogue in addressing housing affordability, and hopefully lead to long term outcomes that address the issues causing housing affordability challenges rather than simply tending to the symptoms,” he concluded.