Australian leader promises help on housing affordability

In this March 3, 2017 photo, visitors to Queensland Gallery of Modern Art build lego buildings against a backdrop of the condominium and office buildings along the Brisbane River in Brisbane, Australia. Australia’s prime minister was fending off criticism over tax concessions for investors in booming urban property markets on Wednesday, April 5, after a central banker warned soaring house prices could threaten the economy. (AP Photo/Hiroshi Otabe)
FILE - In this Nov. 9, 2012 file photo, Britain's Prince Charles, at center in blue suit, travels on the Admiral's Barge past the Sydney city skyline as he crosses Sydney Harbour. Australia’s prime minister was fending off criticism over tax concessions for investors in booming urban property markets on Wednesday, April 5, 2017 after a central banker warned soaring house prices could threaten the economy. (AP Photo/Tim Wimborne, Pool)
FILE - In this Aug. 10, 2016 file photo, Australian Prime Minister Malcolm Turnbull speaks in Sydney. Turnbull was fending off criticism over tax concessions for investors in booming urban property markets on Wednesday, April 5, 2017, after a central banker warned soaring house prices could threaten the economy. (AP Photo/Rick Rycroft, File)

CANBERRA, Australia — Australia's prime minister fended off criticism Wednesday over tax concessions for investors in booming urban property markets after a central banker warned soaring housing prices could hurt the economy.

Housing affordability has become a hot-button issue with many first-time buyers priced out of the market, especially in Sydney and Melbourne, where 40 percent of the country's 24 million people live.

A growing share of accommodation is being snapped up by investors who outbid owner-occupiers with the help of the generous tax concessions.

Prime Minister Malcolm Turnbull said the government's budget for the next fiscal year, to be announced on May 9, will include help for home buyers.

But he said state and local governments were causing prices to rise by not releasing enough land for housing construction.

"Changing tax arrangements can have an impact, but they are a minor part of the solution," Turnbull told reporters.

"The key to dealing with the housing affordability issue is building more houses," he said.

In a speech Tuesday, Reserve Bank of Australia governor Philip Lowe raised concerns about a possible housing crisis as household incomes fail to keep pace with mortgage costs. Housing-related debt rose at a 6.5 percent annual pace last year while household incomes increased by 3 percent.

"The concern has been that the longer the recent trends continue, the greater the risk to the future health of the economy," Lowe said.

"A strong lesson from history is that stretched balance sheets make for more volatile times when things turn down," he said.

Lowe said a shortage of housing needed to be addressed.

But he also said the increase in so-called interest-only loans that account for 40 percent of home loans issued in Australia last year were "unusual by international standards."

Investors repay only the interest on such loans and none of the principal, because the interest is tax deductible as a business expense and paying down the principal is not.

The investors then rely on ever-increasing property prices to deliver a profit when they eventually sell. But economists worry that a bursting of the property bubble would land them in trouble.

Australia traditionally has had a relatively high rate of home ownership and the lack of affordable housing is a growing political issue.

The center-left opposition Labor Party accuses Turnbull's conservative government of siding with wealthy landlords over tenants. Labor campaigned at elections last year for a reduction in tax breaks for property investors to level the playing field for bidders who want homes.

"Other than the government and the few remaining friends they've got, everyone else recognizes that the tax policies of the federal government are pushing the dream of being able to afford your own home more out of reach of everyday Australians," said opposition leader Bill Shorten.

Must Read

Israeli prime minister hopes to triple trade with...

Feb 23, 2017

Israeli Prime Minister Benjamin Netanyahu said Thursday that he hoped to triple bilateral trade...

Australians doubt Trump's commitment to its...

Feb 24, 2017

Some Australians doubt Trump's commitment to its traditional ally; others think their PM will get...

More speed, but will Formula One be more of the...

Mar 23, 2017

New regulations mean the cars should be faster and the competition more intense, yet most...

Vettel breaks Ferrari's F1 drought with victory...

Mar 26, 2017

Sebastian Vettel broke Ferrari's Formula One drought with a victory over Mercedes teammates Lewis...

Vettel's drought-breaker for Ferrari sets up F1...

Mar 27, 2017

With Sebastian Vettel ascending the top of the podium in his red Ferrari race suit, the new...

People also read these

Australia avoids recession with growth in...

Mar 1, 2017

Australia has reported a faster-than-expected 1.1 percent expansion in the final three months of...

Faster F1 cars means bigger, stronger drivers for...

Mar 23, 2017

The new regulations in F1 have made the cars bigger and faster, and so the drivers have had to...

Chinese premier wraps up Australia trip with...

Mar 25, 2017

China's premier has attended an Australian football game with the country's prime minister as he...

Nauru president: Australia's refugee policy...

Apr 6, 2017

Nauru's president said Australia's policy of sending asylum seekers to his nation was "working...

Australian police closer to deciding Vatican...

May 17, 2017

Australian police say they are closer to deciding whether to charge a top Vatican cardinal over...

Sign up now!

Three Sixty Press is your general news coverage keeping you up-to-date with the vast news in the world.

Contact us: sales@threesixtypress.com