My house isn’t an asset. It’s my home.
There’s been a lot of noise over the past few weeks about how changes to negative gearing could lower housing prices. According to Prime Minister Malcolm Turnbull:
“[Labor] is putting at risk Australia’s most important asset; they’re putting at risk the fundamental asset base of our economy.” (Malcolm Turnbull, 29 February 2016)
But in the words of Daryl Kerrigan from the movie The Castle – “it’s not a house, it’s a home”. My house isn’t an asset, it’s where my family lives, sleeps, eats, laughs and plays together.
The way Turnbull talks, you’d think we could decide tomorrow to sell the house and buy some shares or bonds instead. Perhaps he sees Australian families sitting around a stock portfolio for dinner or sleeping under some well placed monetary bonds at night.
Maybe that’s the key difference between the way the right see the world – as a series of dollars signs – and the left, who see it as a place where we live.
For Australians who live in their own home, their house’s value is only really relevant if they decide to sell. And even then, unless they decide to downsize or move to a cheaper city or town – then the money from selling their house goes straight into another house to live in, and there is minimal if any net gain – particularly when you factor in the costs and taxes associated with a property sale.
The only Australians who see a house as an investment asset are the 5% of Australians who own investment property and benefit from negative gearing. Oh – and bankers of course. They don’t seem to be able to lose.
For the rest of us, our house is a home, not an asset class.
Increasing housing prices could cost us all more than we realise
As Turnbull and the rest of the LNP celebrate increasing housing prices, they neglect to mention the very real cost those increasing prices have to the country as a whole in many different ways. Here’s some examples…
Firstly, because mortgages – and the corresponding interest charges – now take up a lot more of a family’s income than they did last century, families have less disposable income to spend on other things. Lower spending means fewer jobs which in turn means lower economic growth.
Secondly, the LNP conveniently fails to mention the impact higher housing prices will have on people’s retirement savings. The size of the average mortgage today is so high, that many people will need to wait until they retire to pay it off. Already today, nearly 45% of superannuation benefits taken as lump sums are used to pay off debt. As housing prices increase, more and more people will need to use their superannuation to pay off their homes. This will leave them with less money to pay for their own retirement, meaning more people will need to claim the government pension, completely undermining the whole purpose of the superannuation system – which was to reduce people’s reliance on a taxpayer funded pension. This will mean higher taxes for those in the workforce – even further reducing their ability to afford to buy their own homes.
Tell him he’s dreamin’
In the words of Daryl Kerrigan – Malcolm Turnbull is dreamin’ if he thinks that Australians are wealthier in real terms because the value of their home has increased. There is a housing affordability crisis in this country – and with increasing numbers of homeless Australians corresponding with a massive number of vacant houses – that’s where Turnbull and the LNP should be focusing their attention instead of protecting the wealth of investors like himself.