An investment strategist at a global wealth manager specialising in exchange-traded funds (ETF) has criticised the federal government’s approach to the country’s housing crisis in not addressing a supply shortage as the root cause of the issue.
To this end, Global X senior ETF strategist Marc Jocum noted the current real estate market focus has centred on falling valuations, with research platform Cotality reporting all property prices have dropped by 3.6 per cent, with the decrease reflecting a 7.1 per cent reduction in Sydney.
“The bigger issue is that policymakers continue to treat housing affordability as a demand problem, from the expanded 5 per cent Deposit Scheme and First Home Super Saver Scheme, to the Help to Buy shared-equity scheme and the latest tax measures designed to supposedly bring more buyers into the market,” Jocum said.
“However, you can’t subsidise your way out of a shortage. Giving buyers more ammunition when there aren’t enough homes is like handing more people tickets to a concert when the venue is already full – you push up the price of entry.
“The latest ABS (Australian Bureau of Statistics) data is particularly telling. New dwelling loan commitments fell 5.4 per cent in the June quarter, with investor lending plunging 8.6 per cent. At the same time, Bathla’s collapse and the wobble in private credit highlight how fragile the financing of new housing can become when prices, construction costs and funding conditions move against developers.
“The answer should be more homes, accelerated approvals, planning reform, infrastructure and a more sustainable migration intake aligned with construction capacity.”
He suggested a different approach that would allow younger Australians to enter the property market.
“Rather than encouraging Australians to put even more wealth into property, which currently accounts for around two-thirds of household wealth, we should broaden the path to prosperity,” he indicated.
“A government-funded ‘baby account’ invested in low-cost index ETFs could give every child a financial head start, harness decades of compounding and potentially be accessed tax-free later, including to help buy a home.
“But the goal shouldn’t simply be to create another generation of property investors. Housing shouldn’t be the only way Australians get ahead.
“Giving every child an ownership stake in the productive economy from birth could build wealth across generations, rather than simply inflate the price of the house next door.”
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