We've let young Australians down on housing policy
We've let young Australians down on housing policy
I’ve taken a couple of weeks off over Easter to recharge the batteries and rethink my investment thesis. A lot of family and friend time. I’ve been doing a lot of listening and less talking. We get caught up in the day to day and sometimes miss the forest for the trees.
One thing that’s very obvious to me is the high level of dissatisfaction among young adults (20-35 year olds) when it comes to real estate, their economic outlook and more generally their hope for the future. This is a big social issue which will play out at the ballot box and ultimately force politicians into action on the real estate market.
Millennials have higher HECS debts than previous generations and are now facing house prices up to 15x their individual incomes in the major metropolitan cities. They’ve also experienced the lowest wage growth compared to previous generations, during the highest periods of inflation.
Add to that the highest proportion of casual and contract workers among living generations, especially those without a Uni degree.
If you open up Tiktok and Instagram and navigate outside your algo recommended feed, you will see that these millennials are extremely disenfranchised.
According to Kos Samaras, Director at RedBridge Group Australia, “politicians navigating the landscape of these challenges will be as delicate as a barn dance in a minefield”. The 2025 Federal election will be won/lost on housing policy.
I see three potential policy implications:
More Density: It seems like planning will favour going higher in the major metro areas than spreading out into the regions. I say this based on the NSW Minns Government proposed planning changes. When I think it through, It makes political sense for the Labor Party premiers. By facilitating younger voters to reside closer to work or relocate to areas of their choice, the policy is likely to shift demographic trends in favor of the Left (especially in seats traditionally challenging for Labor to shift).
Migration Cuts: Bringing on new supply is hard, policy changes will address the rules. But the market will need to ultimately create the supply. It will take time, the easiest thing to alleviate housing pressure is to cut migration. As my friend Ninus Kanna from Cardinal Finance says, everyone is focused on supply, but the answers may in fact be in reducing demand. I suspect the Federal Government is keeping cuts up its sleeve come election time.
Shared Equity & Lending Support: The current First Home Guarantee Scheme is great in theory, bad in practice. The 5% deposit is a good incentive for first home buyers to get into the market, the only problem is the caps in place are unrealistic (Sydney metro caps at $900k). I suspect we’ll see more policy updates around the first home buyer support in different shapes and sizes, but they’ll need to be significant to swing votes.
Property investing is a balance between good returns, decent income and capital gains. Real estate is a network asset. Everything impacts everything else in its own way.
The market is very strong in the short term, I’m continuing to see very strong interest across our businesses despite higher rates. Prices are hitting record highs. Unemployment is still very low and demand for property has never been higher.
I just hope that we also get the long term right, because I want my assets to be there for my children and their children. For that to happen, Australia needs to continue being a great place to work, live and invest. I don’t want it to become another San Francisco or New York. I want us to be investing in making this the greatest place in the world to enjoy our lives.
Peter Esho is an economist and Founder of Esho Capital. He has 20 years of experience in investments and markets.