Australia may not be in a property bubble, but housing and housing policy are key issues that need to be addressed by both government and industry. This was the view of Ken Marchingo, CEO Haven; Home Safe, and Carolyn Viney, CEO Grocon at Australian law firm Lander and Rogers' annual Economic Briefing in Melbourne last week.
Over 300 attendees heard Marchingo and Viney, alongside Alan Oster, Group Chief Economist at NAB and John Durkan, Managing Director, Coles, discuss the global and domestic economy and the outlook for their sectors.
Oster was quick to clarify the much-debated question of whether Australia was in a property bubble, stating that there was no housing bubble. He also cautioned against talking about Australian house prices as being among the most expensive in the world, citing European cities such as Paris as places where house prices were truly unaffordable.
Speaking about the outlook for the affordable housing sector, Marchingo said that although he was happy "broadly speaking" with where the Australian economy was at, the health of the market in terms of house prices and what they mean for real people was an area of concern.
According to Marchingo, the collapse in low-skilled jobs in Australia is leading to the creation of a generational underclass. This was particularly visible in regional areas where he said organisations like Haven; Home, Safe are dealing with third generation unemployed families. "We need to think about what price we pay in the economy if we continue to create an underclass that is not consuming at its maximum potential," Marchingo said, "There is a strong commercial interest in keeping low income earners with affordable rents because they spend in the rest of the economy."
Marchingo also said lack of sensible policy around affordable housing means that people who have worked all their lives are finding themselves unable to afford to rent on retirement. "We've got to address the house price issue, but we can't do this until we address housing policy in Australia," he said.
Viney agreed, commenting that housing and housing policy in Australia generally is a "big problem". Although Viney noted that this is not just a government issue, as industry also has a significant role to play. "For the two biggest property markets in Australia, being Melbourne and Sydney, there are some really long term legacy issues around the fact that our governments and, in part businesses, have not looked 30 and 50 years forward… I think we've been reasonably complacent. If we want to see something better for the future, there probably needs to be a whole shift in mind set."
Discussing the role that people in real estate play in the housing market, Viney said that Grocon was of the view that "what we do every day, which is creating buildings… should include a very tangible direct benefit into some of the providers of affordable housing stock. For the project we did here in Elizabeth Street, we actually gave about $10M back to the government and said please put that into the next project. Hopefully that provides some more housing for those people who are at risk."
Lander & Rogers Property partner, John Wells, who MC'd the event, said that in terms of the property sector, his team was "certainly seeing huge amounts of investment in residential housing stock within Melbourne's CBD and inner fringes, much of which is coming from offshore." Wells agreed with Marchingo and Viney's comments on affordable housing, commenting that, "We do a lot of work in the affordable housing space and there's no doubt that Australia faces a significant challenge in ensuring that an adequate supply of affordable housing is available to meet the increasing levels of demand."