It's Simple Supply & Demand
There's been a huge amount of speculation around the current real estate market and in particular what can be done to improve opportunities for first home buyers.
What I find staggering is the amount of politicians in very significant positions who make "announcements" or suggest policies that have been shown time and time again to be abject failures.
And the main reason they are is because they always address the wrong side of the equation namely demand. In any boom market anyone with even a basic understanding of year 12 Economics (like yours truly) will tell you the dumbest thing to do to help those struggling to make their first purchase is increase their spending power with ideas like deferring their Stamp Duty for five years or being allowed to dip into their Superannuaiton.
These are demand related solutions which always end in prices spiking up even quicker as this "extra" money or advantage transfers straight from the buyers to the sellers.
If we're serious about solving this problem then the supply side of the equation is what needs to be addressed. And why do we hear very little about this from our politicians. Well it's quite simple.
It's just plain too hard and is a sure fire vote loser.
Can you imagine if either of the current NSW State Election candidates announced a policy that would allow for increased medium and high rise development of homes in existing areas or new development of homes in current rural areas on the city fringe ? Do you think the residents of those areas would be more or less likely to vote for the candidate who makes this announcement ?
Until someone with a long term view takes a serious look at the supply side of this issue the real estate market will remain strong. Only interest rates will temper the current demand and due to the concern being exhibited by the Federal Reserve Bank regarding the state of the greater economy they don't appear to be going down any time soon.