Fed: PM says high house prices here to stay

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Fed: PM says high house prices here to stay

By Krista Hughes, Economics Correspondent

CANBERRA, Aug 4 AAP - Prime Minister John Howard said today he could not promise thatproperty prices would fall as a result of a federal inquiry into housing affordability.

Soaring real estate prices have made it the toughest time in 13 years for new homebuyers to enter the market, prompting the government to order a Productivity Commissioninquiry into home ownership.

But Mr Howard said higher house prices were good for people who already owned theirhomes, and he could not see prices coming down.

"I can't promise that we're going to be able to slash the cost. I can't do that," MrHoward told ABC Radio.

"It may well be that we can make valuable changes at the margin that will help, andthat's the purpose of this inquiry."

The inquiry, to report by March 31 next year, will examine components of the cost ofhousing, barriers to first home ownership, and the release and development of land.

It will consider the impact of taxes on house prices, and the efficiency of planningprocesses, as well as ways to help low-income earners buy their own homes.

Mr Howard said low interest rates - which were expected to remain on hold after tomorrow'sReserve Bank board meeting - had helped push up property prices.

"Because we have low interest rates, people have borrowed a lot more. They can affordto borrow more. They, therefore, borrow more to buy more expensive houses, and as a consequencethe whole price structure of housing around the country has gone up," he said.

"Now that's not going to change, and I think we have to keep that in mind."

Mr Howard ruled out introducing a capital gains tax on the family home, or making interestpayments on housing tax deductible, as in the United States.

And he hit back at criticism from the states and Labor that the GST had helped pushup property prices, saying the inquiry was free to comment on the GST.

He said Queensland Premier Peter Beattie should be ashamed of his comments that theGST had a greater impact on prices than state government-imposed stamp duty.

Although the GST did not apply to existing houses, the government had introduced the$7,000 first home owners grant as compensation for the GST's impact on house prices, laterdoubling it for home builders.

Opposition leader Simon Crean said the introduction of the GST had sparked a majorcrisis in Australian housing because the first home owners grant did not provide enoughcompensation.

"You don't have to have an inquiry to tell you that when you put the price up of something,it makes it less affordable," Mr Crean told reporters in Geelong.

He said Labor would work with the states to release more land for development, andboost savings through nest egg accounts for young people.

AAP kmh/sw/ak/de

KEYWORD: HOUSING NIGHTLEAD