Queensland has one of the nation’s lowest levels of home ownership in a market grappling with cost pressures, mismatched supply and low rental mobility.
Real Estate Institute of Queensland CEO Antonia Mercorella told a Brisbane breakfast event this morning that only 63 percent of Queenslanders lived in their own home.
This compared with 70 percent in the 1970s, which was considered the ideal mix of owners and renters in the market.
“(We have a situation) where you’ve got an entire cohort of people, and generally it’s the 25 to the 39-year-olds, where the pain point really sits,” she told the Queensland Futures Institute essential services and infrastructure forum.
“That’s where we’ve seen those rates of homeownership really drop, quite significantly. You’ve got this group of people who don’t feel like they’ve got a pathway to home ownership.”
Adept Economic Direct Gene Tunny told the forum that the state was facing a major issue as it continued to borrow money just to “keep the lights on”.
He described the 50 cent flat fee for public transport in Brisbane as “reckless”, given the state of Queensland’s finances.
Ms Mercorella said the lower home ownership rate was putting enormous strain on the rental market.
It was exacerbated by the undersupply of housing generally and low rental mobility because people were reluctant to move once they found accommodation.
“(Rental) vacancy rates are across the state at the moment sitting at a near 0.9 percent,” she said. “Just for some context, we characterise a healthy rental market as one that sits between 2.6 to 3.5 percent vacancy rate.”
Ms Mercorella said the general goal was to create about 50,000 new dwellings in Queensland, and currently we were missing the mark “pretty wildly” and slipping behind in each quarter.
“We’ve got homeownership sitting at about 63 percent in Queensland, well below the national average,” she said.
“In the 70s, it was around 70-30 (ownership to rental) and ideally, that’s where you want it to be.”
Big price increases
The structural issues were reinforced by historically high house prices – with the median sitting at $1.4 million in the Brisbane council area and $1.1 million in Greater Brisbane.
This represented average price growth of around 80 percent over five years.
Another issue in the market was that, due to cost pressures, only certain types of developments stacked up, and they tended to be high-end apartments.
There was also an issue around creating homes that reflected the changing demographic landscape.
Households were becoming smaller, but the market was not providing the diversity of housing needed to meet the changes.
Ms Mercorella said that, while the fundamentals remained strong in Queensland, housing was an issue that still needed urgent attention.
Shelter was fundamentally important to the “human psyche and condition” because it gave us a sense security, the ability to plan and roots in the community.
State budget ‘isn’t in good shape’
Adept Economic Direct Gene Tunny agreed the Queensland fundamentals were still strong, but he said the State Government needed to wind back use of debt to pay for operational spending.
“The budget isn’t in good shape,” he told the forum. “The revenue we’re getting isn’t sufficient to cover our current spend. So, we’re running operating deficits, even before you take into account new capital spending.”
Mr Tunny said the state was running a $9 billion operating deficit – “so we’re borrowing to pay wages or to keep the lights on, so to speak”.
“So what we’re doing is as if you’re paying for your groceries on your credit card, but you’re never paying that balance down in the interest fee period – just letting your credit card debt build up to the limit,” he said.
“That is a real problem for the State Government. They need to think about significant cuts to spending, relative to the baseline, or even increases in taxes and charges.”
Mr Tunny said the 50 cent flat fee for public transport (introduced by the previous Labor Government and supported by the current LNP Government) was never affordable.
“It was reckless, and so the first thing I would do is cut that,” he said.
Too many jurisdictions
Grattan Institute CEO Aruna Sathanapally said Australia had some real strengths in a global context – a relatively high skill base, a relatively young working population (for now) and good strategic use of migration.
Despite this, there were “barnacles that hold us back”.
“We are a country of 25 million people. We have seven jurisdictions with different rules, different taxes, different…standards,” she said.
“It is really hard to justify that at the scale that Australia operates. There are many wonderful things about this large continent, but it is large, and we are a small population, and that has overheads – it means we need more infrastructure per capita than other countries.”
Aging population will ‘hit us’
Dr Sathanapally said the aging population would eventually “hit us” and create a raft of new policy issues.
The cost of the hospital system, for example, had “escalated dramatically” and would continue to do so as the population aged.
“There is a portion of that that has been coming at us for a really long time,” Dr Sathanapally said.
“We’ve been able to see that n terms of rising chronic conditions, and changes in the morbidity mix in the Australian population, as well as just the sheer fact that we have some of the longest life expectancies in the world.
“Those last few decades (of life) are very intensive from a health system perspective.”
She said hospitals typically focused on episodic emergency care rather than providing support though potentially decades of managing conditions.
