Government creating Australia's own housing disaster
Count chairman Barry Lambert has spoken out against what he sees as looming “current government incentivised financial ruin” in the first home owners market.
Lambert, the former head of one Australia’s biggest financial planning groups, said the subsidies currently being provided to first home owners were creating Australia’s next financial disaster.
Speaking at Money Management’s State of the Industry breakfast in Sydney yesterday, Lambert said while house prices are booming at the bottom end, many first home owners are overreaching. This is of serious concern in a low interest rate environment and one in which unemployment is expected to rise.
“You give them a few thousand dollars more and they go and buy a house for $30,000, $50,000 or $100,000 more than it’s worth,” Lambert said.
“They’re in debt for the rest of their lives.”
Lambert believes many Australian home owners would be “better off renting” as Australian homes are overpriced.
“The prices of houses in this country are much, much higher than the prices of houses that brought down the US sub-prime [market],” Lambert said.
“And they’re much higher than the houses in the UK which we’re reading about. And this is subsidised by the Government. It is the next disaster,” Lambert said.
Lambert warned that when interest rates rise — which they will as soon as the economy recovers — “these people will suffer”.
He used an example from recent history to support his concerns.
“Back in the 1990s the New South Wales Government subsidised first home owners,” Lambert said.
“They made all this money available and people were encouraged to buy their homes — because politicians for some reason think if you own your home for the rest of your life you’ll vote for them, or this is good for you,” Lambert said.
At the time Lambert, through his dealer group Count Financial, had a relationship with property valuer Herron Todd White. According to Lambert, the experience of the valuer in one part of NSW was that “every second house out there was being sold by a building society because they discovered while ever these people live, they will never have anything but negative equity”.
“And we’re going to go through that again when interest rates rise,” Lambert said.
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