KEEP calm, the housing market is not overvalued.

These are the words of our Treasurer Scott Morrison, who said in an interview at the International Monetary Fund’s headquarters in Washington there was “no evidence” the property market was overvalued outside “arguably some pockets if x and y and z happened, and x and y and z has not happened.”

The housing market isn’t overvalued, according to Treasurer Morrison, we are just exaggerating.

“So I think these risks can be overstated,” he said.

But if you are one of the almost 50 per cent of Australians who don’t own their own home and who were frustrated by these comments, you are not alone. Taj Singh, co-founder of First Home Buyers Australia, said these comments highlight just how out of touch the government is when it comes to home ownership, and in particular, the dwindling number of first home buyers.

“[The government] is definitely out of touch,” Singh told news.com.au.

“They don’t know how hard it is for a first homebuyer to actually purchase a first home, especially in Sydney and Melbourne where housing affordability has just gotten worse and worse for first home buyers.”

According to official figures from the Australian Bureau of Statistics (ABS) released today, first homeowners make up just 13.4 per cent of all owner-occupiers in Australia. In New South Wales that figure drops to 8 per cent. The national long-run average since the ABS started collating these figures in July 1991 is 19.4 per cent.

“Because first home buyers are a small proportion of the market ... that’s why they are not being mentioned by politicians,” Mr Singh said.

“The fact that they haven’t even implemented any reforms since they came into government just goes to show that first home buyers are forgotten to them.

“Negative gearing rules still exist, so investors are aided by generous tax concessions which first home buyers don’t get.”

HOUSING MARKET IS OVERVALUED

According to Shane Oliver, chief economist at AMP, there is “mountains” of evidence to Morrison’s “no evidence” that suggests Australia’s housing market is overvalued.

“Whether you look at house price-to-income ratios or the ratio of house prices-to-rents or affordability measures, they are all terrible. It is getting harder and harder for somebody to get into the market,” Mr Oliver told news.com.au.

He said house price-to-income ratios in Australia are “well above” what we see in other countries.

“For example, the average house price-to-income ratio in Sydney is something like 12 times. In Melbourne, it is about 10 times. In American cities, it is about three-and-a-half to four times.”

And if you examine house price-to-rent ratios for houses, the gap is even bigger — around 37 times, depending on how you adjust it, Mr Oliver said.

“It puts [house prices] up, at my measures, at 37 per cent overvalued,” he said.

“Likewise, house prices in Australia relative to the long-term trend are about 20 per cent above the norm. Virtually any indicator you look at suggests Australian house prices are expensive.”

WAKE UP, MORRISON

Mr Singh and First Home Buyers Australia are now calling on the government to wake up to these affordability issues and implement reforms. A good place to start, Mr Singh told news.com.au, would be to reform negative gearing.

But unlike the Labor Party’s polarising policy — to limit negative gearing to new properties — First Home Buyers Australia is advocating for slightly less “erratic” changes.

“For existing property, negative gearing should only be 50 per cent deductible, and not 100 per cent deductible. This means it won’t have that erratic effect that Labor’s policy could have had on the property market,” he said.

“Then we are saying 100 per cent negative gearing deductibility should remain for new homes because new homes increase supply and increased supply helps property prices.”

In addition, the first homebuyer advocates are also calling for a specialised savings account.

“First home buyers should be able to deposit a proportion of their pre-tax salary to their first home savings account, which means they get the tax benefit,” Mr Sing told news.com.au.

“If you are earning $70,000 and you contribute $10,000 a year into your first homebuyer’s savings account, you should get that tax free. Your taxable income will only be $60,000 because you’ve contributed $10,000 to your first home savers account.”