Australian Prime Minister Scott Morrison has warned that Labor’s plans to reduce capital gains taxes and other ideas would be “inviting a crash” in the housing market.
As Morrison already held the position of Housing Minister prior to his promotion to the country’s top job, he feels well-placed to comment on how his government aims to stave off the threat of a housing market crash.
With housing price corrections currently occurring in Sydney and Melbourne, some analysts have warned that a crash could be on the way if the right policies are not in place.
Morrison is also having to deal with pressure from both sides of the political arena to make homes more affordable for many Australians, but he slammed the idea of making it easier for people to buy their own homes at any cost, saying that this could easily derail the economy.
The criticism centers around the opposition party’s plans for the housing market. Labor released proposals to bring house prices down by halving the capital gains tax discount on houses currently in place as well as reducing negative gearing to new builds.
When Labor leader Bill Shorten announced these proposals, he said that they were necessary to make home-buying more accessible to the average Australian and that investors with increased access to liquidity currently stand a better chance of buying homes than those on low incomes.
Morrison, however, derided these ideas as highly inadvisable ones that could bring on a market crash.
Labeling the twin “sledgehammer of negative gearing and capital gains tax changes” as “good for nobody” if they contribute to a housing market crash, he said that housing prices can come down gradually without resorting to drastic measures that could topple the market.
Defending policies set by his party and himself as Prime Minister, Morrison said: “We’ve seen house prices come back to a soft landing.” He added that this was the view of both the Reserve Bank of Australia (RBA) and ratings agencies.
Stating that everyone is aware that the housing market is the big issue surrounding the economy and leading to uncertainty, he said a “soft landing” is necessary to placate the worries of ratings agencies, banks, and most importantly, the Australian people.
House prices dropping an average of 3.5% in the last year suggests that the current government policy is working without sending prices plummeting.
The average Australian has found it difficult to take part in the housing market, and as the recent scandals unearthed by the Royal Commission inquiry into financial misconduct show, citizens were often given bad deals on mortgages and savings rates. This affected their ability to both purchase a new home and pay it off at an affordable rate.
Morrison suggested that new buyers have finally been able to find their feet in recent months, as data for the midpoint of 2018 showed that first-timers accounted for a solid 18% of all home purchases.
The Prime Minister said that Australia has not managed to see this figure for over five years, and it displayed positive signs for the market as a whole. He cited a crackdown on interest-only mortgages, and the introduction of positive saving schemes as just some of the changes that are starting to bear fruit.