House prices
in Australia are more than double what they should be,
according to a new study by Alan Moran for the free market Institute of Public Affairs launched today.

Thirty years
ago the average house price in Australia was approximately three times the level of
median family income. Today, the average house price is nearly nine times that
level.

“While the
costs of house construction have remained stable over recent decades, the costs
of land have dramatically increased,” Moran says. “The main cause of high house
prices is state government planning restrictions.”

Another think
tank, the Centre for Independent Studies, is also examining the issue. A very
high powered group, including incoming Reserve Bank Governor Glenn Stevens,
Productivity Commission Chairman Gary Banks, demographer Bernard Salt and
Wendell Cox, the principal of American consultants Demographia, discussed the
issue at the Consilium conference last week.

The political
left usually talks the most about housing affordability. Why is a punch coming
from the right?

Well, more and
more Australians are using their houses as their nest eggs. A recent report
from the Reserve has found Australians have effectively given up the
traditional approach to saving.

In Australia – and the US, Britain and Canada – the home is replacing savings accounts
as the method of choice to put cash away. People feel wealthier as they see the
value of their homes climb, and actually reduce the cash they put aside for a
rainy day.

More and more,
financial security is tied up in our homes. Australians who can’t get into the
housing market not only miss out on the benefits of economic good times, but
can’t fully participate in our economy.

That’s an
issue for free marketeers. They know that letting council house tenants buy
their own homes was probably Margaret Thatcher’s single most important
political achievement. It’s not for nothing that their greatest focus is on
“property owning democracies”.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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