When will politicians accept housing policy evidence?
Saul Eslake is an independent economist, business director and public policy consultant.
We now have nearly 60 years of unambiguous and unambiguous evidence telling us this everything which allows Australians to pay more for housing than they otherwise would – first home grants, stamp duty subsidies, mortgage deposit guarantee schemes, shared equity schemes, preferential tax treatment for real estate investors and, in effect, lower interest rates or reductions in credit standards – mainly results in higher house prices rather than higher home ownership rates.
The scheme announced yesterday by the government would prima facie allow singles to pay up to $ 250,000 and couples up to $ 600,000 more for housing than they would otherwise (based on the maximum amount people can withdraw from their super, which then becomes part of their deposit, against which they can then borrow up to four times, assuming a 20% deposit requirement). So it will definitely have the same effect as the schemes I listed above.
Put a fork on it, the elections are almost done.
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And there is no annual limit to the number of people who can accept it, unlike the government’s deposit guarantee schemes or Labor’s “shared equity” program announced during the election campaign. There are no limits to the applicants’ income, nor to the value of the property purchased under the scheme. The only binding factor is likely: how many would-be first-home buyers have that much money in their super?
This scheme will be warmly welcomed (as I have no doubt it is intended to be) by the approximately 11 million voters who already own at least one residential property, and especially by the approximately 2 million voters who own two or more properties. It might be welcomed by the much smaller number of would-be first-home buyers who have the ability to take advantage of it, although you’d like to ask how many of them actually are – and whether a young would-be home buyer has been paid so much that can accumulate so much super, why do they need to take it down to buy a first home?
But I suspect it will be met with desperation by most of the typically 100,000 people a year who manage to become first time buyers and by the presumably larger number that they would like but have not been able to become first time buyers.
And it will be met with similar despair by those who, like me, years have passed wishing that politicians really learn something from the trials of the past six decades.
The policy, of course, also reflects the fact that the Coalition hates retirement – because it gives unions more power and influence than it would otherwise allow them to have its members in decline – apart from as a vehicle to allow older Australians to pay less taxes, as evidenced by the other policy announced yesterday to expand eligibility for the transfer of the proceeds from the sale of the retired home.
Although the government claims that its policy will ultimately not harm people’s retirement savings because they will have to pay the amount plus the capital gain on it in retirement when they sell the property they bought, this assumes that residential property prices will rise to an extent. rate similar to or higher than that of a typical super fund.
This has been true for the past 20-30 years, but for this very reason it may not be true for the next 10, 20 or 30 years. Additionally, people do not normally leverage super, while they do so on residential properties, so this scheme exposes people to greater overall asset price and interest rate risks than they would otherwise face, as well as encouraging them to do so. which could turn out to be a bad asset allocation decision.
I want to scream, “This reckless house price inflation must stop!” But of course it won’t.
Disclosure: Contrary to Senator Jane Hume’s claims this morning, Saul Eslake doesn’t own more than one house.