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Has government intervention in property gone too far?

In its quest to give every Australian a roof over their head, some property experts fear the government is risking negative long-term effects.

victor kumar steve waters right property group spi pjoypa

In a recent episode of Property Investing Insights with Right Property Group, host Phil Tarrant and investment specialists Steve Waters and Victor Kumar compared their views on government intervention into housing supply and affordability.

“The history shows us, at least in our lifetime, that every time a government enters a free market there is a consequence,” said Mr Waters.

According to Mr Waters, intervention efforts to help home ownership have been on the rise in recent years and show no signs of stopping, but he fears this could lead to strained affordability in the long term.

Mr Kumar gave the example of Queensland, which recently doubled its first home owner grant to $40,000. He shared that in his opinion, a better solution would have been to ask: “What if we gave that $40,000 to the developer as an incentive to reduce their cost?”

“That’s a better effect,” he said. “It doesn’t then give rise to the articles in a year’s time that say home ownership is unaffordable in Queensland because the prices have gone up.”

Another policy example that the trio cited was Western Australia’s decision to give out a $20,000 grant to owners and investors to build a home during the COVID-19 pandemic.

“It actually broke the back of the construction industry in WA because everyone started building,” explained Mr Kumar. “It absolutely put accommodation in WA at the time for people who needed it, but it did also compromise the quality of it.”

From Mr Tarrant’s perspective, the issue with government intervention is primarily a structural one.

“Australian politics is all about dealing with the immediacy problem we have right now; hence why we always go from crisis to crisis to crisis,” said Mr Tarrant.

He stated that the short time span of the election cycle prevents local, state and federal governments from making the “systemic fix” he believes the housing market needs, because it would require governments to make the unpopular decision to exacerbate the crisis in the short term.

Mr Tarrant gave the analogy of the Sydney Harbour Bridge as a counterpoint. He said: “It was huge overkill at that point in time to build the bridge for the amount of cars that are using it now, but it was foresight into the future about creating something that would be as good in nearly 100 years’ time.”

“The Australian people haven’t got the foresight to be planning 70, 50, 40 years ahead when it’s all about the immediacy of the election cycle,” he concluded.

Listen to the full conversation with Right Property Group here.

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