Young people in the developed world are increasingly unable to transition to home ownership.
A century ago something similar was happening in America.
A big part of America's solution was the 30 year fixed mortgage. This has a serious downside. When interest rates are rising people are stuck and can't move to where suitable jobs are, because if they do they lose their cheap mortgage. The effect is worse than the way that Australian states depend on Stamp Duty for revenue.
The correct answer is the equity-preserving loan. The interest rate needs to vary because it needs to be the same for existing and new borrowers. But we also don't want a situation where falling house prices mean that sellers will lose equity they need to buy elsewhere. The equity-preserving loan works like this: (a) interest payments are lost, of course; (b) however repayments that reduce the loan create equity which is preserved as a proportion of the house value. So if your house cost 1 million, and you're loan was $500,000 then your equity at the start is also $500,000. Now if you've paid off $100,000, that is 10% equity that you've gained and you are up to 60% equity. Even in a falling market you retain that 60%. So if you now sell for $900,000 then you only have to pay back 40% of the loan when you sell, in the example case that is $360,000 instead of $400,000. Assuming house prices have changed uniformly, you are just as well placed to buy a new place as you would be if you'd sold for 1 million in a steady market.
Note that this scheme means that home owners can't go under water and get a margin call when their house is worth less than the loan. Which in turn means that buying a house with nothing down is not necessarily a problem.
Well there are complexities and potential for cheating. So the government would make up the difference to allow equity-preserving, but only if you buy and sell through the government housing agency.
The 2nd part of the plan is cheap housing with zero deposit in exchange for some National and Local Service. Of course the most important National Service we need is the production and nurturing and education of the next generation. We also need to create local communities that work, starting with cooperative child care.
The way to make cheap housing is to get Chinese companies involved. Flat pack housing is a start, but I think it is possible to do a whole flat pack suburb to suit an allocated area -- everything from the buried services to houses and support buildings like schools, medical places, and more.
