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If you're living outside Australia, the main thing that you would have heard about our country in the last year is how terrible our housing crisis is and if you're living in Australia, the main thing that you would have heard about our country in the last year is how terrible our housing crisis is this is last year's Demographia International Housing
Affordability Report and it shows that out of 94 major cities around the world Australian cities are the 2nd most expensive, 7th, 9th, 15th and 20th least expensive and that's a problem because there are only five major cities in Australia it's extremely painful in our two largest cities Melbourne and Sydney where the average house price is 9.8 times and 13.8 times the average salary respectively
it's becoming an unlivable price drop in Sydney Centennial Park is selling for $7.8 million it's becoming so unbelievable the problem with Australia's housing crisis is that there's really no escape because it goes beyond house prices and it's also spread into the rental market Australia's housing crisis is a supply demand problem at a basic level, in which demand is very high but
more and more people are turning to the rental market, you're getting scenes like this where hundreds of people are queuing up for a perfectly average but very overpriced rental, because they have no other option, because competition can be very intense, tenants are starting to pay their friends or people on Hawaii Tasker to go to rental inspections for them, so that they can apply for more homes,
to increase their chances of being accepted somewhere, but why is that and why is so little being done to fix it? At a basic level Australia's housing crisis is a supply demand problem, in that demand is too high and supply is nowhere near enough and there are four key points to talk about and I would like to start with the demand side firstly the number of immigrants coming into the country each year in the 12 months ending June 2024 was 446,000,
which is 1.6% of our total population. Now that number is coming down a little bit post the postco reform, but the government is still forecasting 2.18 million arrivals over the next 5 years and one of the most discussed topics in relation to immigration is the impact it will have on our housing crisis and while I don't buy the borderline racist spin that a lot of the Australian media likes to spread about
this topic, it is true that this rapid increase in population creates additional demand for housing, which often outstrips supply, particularly in urban areas and this urban concentration increases demand in already high demand dem markets, which naturally drives up prices and rents in these cities, so that is one element of the crisis, but as I'll talk about in a minute, it's not the number one problem while the Australian population costs the government $85,000 per capita,
so curbing immigration is something that the numbers tell us we really want to avoid, but on top of immigration while we're on the demand side of the equation, we need to reduce the real estate in Australia There is a need to talk about the property investment environment particularly a topic known as negative gearing,
negative gearing is an interesting policy where as a property investor if an investment you bought generates negative cash flow in a given year you can take that loss and reduce your taxable income with it,
so if I bought a one million dollhouse and it cost me $10,000 more in mortgage interest maintenance insurance and depreciation than I earned in rental income,
instead of paying tax on my $80,000 salary I would pay tax on $7,000, now this significantly encourages investors to pay more for investment properties which drives up house prices, in addition we also have a rule where if you as an investor hold your property or your shares for more than 12 months, then when you sell that investment you will only pay tax on 50% of the capital gain, a rule that makes property investing very profitable Makes it attractive