Some pretty clear signals the government is paving the way for a massive property bribe.
We’re still a couple of months off the May budget, but I reckon it’s a budget that will have little something extra for the housing sector.
I’m not sure what form it will take – but I think we’ll see something aimed at first home buyers. Maybe they’ll be allowed to raid their super. Maybe they will make their mortgages tax deductible, even if they’re owner occupied. Maybe they’ll just give them an extra chunk of cash to play with.
But we’re in line to see something.
And if the government does decide to target the demand side – which is pretty much all the Federal government can do – then we should see that pass directly through to property prices.
Throwing money at the problem always ends up on the price side of the ledger.
You can see the government casting around ideas at the moment – flying them up the flag pole and seeing who salutes.
Right now we’re seeing more middle fingers than salutes for these thought bubbles, but you get the sense that they’re desperate to find something.
And in many ways they don’t have a choice. Housing affordability is a problem that refuses to go away. The kids are hurting, and as more and more parents find that they’re being asked to bail their kids into property, more and more boomers are annoyed about it to.
Time to do something (or look like you’re doing something.)
Here’s a fun exercise. Find a random punter on the street and ask them what Labor are doing about housing affordability.
They’ll probably tell you that they’re going to cut negative gearing. In the public’s mind that policy is tied to affordability (even if the connection is a little weak and dubious in practice.)
But that’s Labour policy. When it comes to affordability they have something that’s bold, visionary and courageous.
(or at least looks that way.)
Now ask them what the Coalition is doing?
*Blank stares.
In the public’s mind, the Coalition is out to lunch on this one. And to be fair, they have been out to lunch. It’s almost 4.30 and they’re still not back in the office. All we’ve got is an incoherent phone message from Scott Morrison about getting his wife to order ribs.
They concluded an inquiry at the end of last year that came up with precisely zero recommendations.
Zero.
That was money well spent.
The only thing they’ve got is a pledge not to do something (cut negative gearing).
So they’re outgunned right now. The longer the negative gearing – affordability connection sticks around, the more entrenched it will become and the harder it will be for the Coalition to fight it.
So they need to move quickly. The May budget is the obvious battle ground. They need a policy that is bold, visionary and courageous.
They also need a policy that is safe and improves affordability, without lowering prices. They need something that doesn’t mention negative gearing. And they need a policy that doesn’t blow out the budget.
They need a unicorn.
The government does have a bit of a war chest to work with. A few weeks ago the government announced they were axing the National Housing Affordability Agreement (NHAG). From The Australian:
The $9 billion National Housing Affordability Agreement is set to be axed in the May budget following a report revealing that the states and territories had failed to meet almost every benchmark set by the federal government since it began in 2009.
Figures obtained by The Australian revealed that the Rudd government scheme, with a price tag of almost $1.5bn a year in grants to the states, had not delivered any measurable improvement in the provision of affordable housing.
Despite pledges to increase the supply of social housing, the 2017 Report on Government Services (ROGS) shows that public housing stock, instead of increasing as committed, had been falling since 2009, going backwards by 16,000 homes.
So that gives them $9bn to work with. And they can hardly cut one of the few measures targeted at affordability and not replace it with something.
So something is coming.
The only question is what.
As I said, the Coalition has been floating a few ideas around, testing the waters.
Scott Morrison has hinted at a government-backed bond aggregator scheme – a sort of financial intermediary that will help developers of affordably rental housing get finance.
This was one of the ideas he came back from London with.
The idea to let FHBs raid their super for a deposit has been around for a while too. Understandably the super industry is dead-set against it, since it means cycling money out of super and into the property market, but I’m not sure how much political clout the super industry has… it’s not nothing though.
And then last week, Andrew Broad, the Member for Mallee, said that banks should forgo a deposit from FHBs if they’ve got three solid years of rental history behind them.
Yep, 100% LVRs.
(Not so many salutes for that one).
So who knows. It’s hard to predict, especially with Tony Abbott sniping from the clock-tower. It could be anything.
But you’d have to think that something is coming. We’re probably talking something in the $2bn a year range. It will probably be targeted at FHBs, but could possibly extend to all owner-occupiers.
But the government needs something.
So hats out folks. The money is coming.
What do you think they’ll do?
Cranky says
Owner occupier mortgages as a tax deduction would help lubricate the system. It would not introduce a raft of increase expenditure on welfare as it could be treated as per negative gearing, re-adding the ‘loss’ to income for welfare calculations.As the reduced tax income to the government is managed at the input rather than the output (welfare), then the administrative through cost will be minimal. I like it…I like it a lot.
KatM says
FHBs in WA may qualify for State gov grant to $15K from ruling Lib party for new houses & off-the-plan ap’s.
ron goddard says
hi jonno..wow laugh! they’ll do bugger all thats sensible. canberry reminds me of a scrambled egg salad. i still (and i know that i am a dummy) cannot rationalise current housing prices to reality. how come house prices, that were around $150,000..(mean) across oz in 2001/2 suddenly become $500,000(mean) in 2008? thats an increase of 330% in 5.5 years which translates to 60% per annum.
since then it has muddled along to $560,000(mean) across oz. so thats a 12% increase in the past 9 years.:1.333% per annum. are we halucinating or is alice in wonderland cutting loose again? lets look at income. 2001 average wage$40,000 p.a. tax $8,000 net $32,000. house price $150k that is 3.75 times a man’s average annual wage. todays annual wage $80,000, tax take(stealth) $25,000. net $55,000. house price $560,000..so its 7 times a man’s annual wage..BUT look at the tax theft!! so we have a net wage against a house price of (2001) 32k/150k= 4.7%. 2017 style reads: net wage 55k/560k see yawow is 10.2 years of sweat to buy a house.. and maybe never pay it off. so where do we go now? my estimation is that it will get worse. no kidding. and don’t become illusory and imagine that the government has the answers. if they did everything would be rosy, wouldn’t it? yes..they’ll do bugger all thats sensible and leave US to sort out our miserable lives lol. never ever think that politicians or government are here to help us..that is the height of delusionment. they a bunch of megolamaniacal scumbags of the first water. and you know what? i will be the first beneficiary of the governments ‘goodwill’ cos i am in the midst of fhb trying to get a roof over their heads. selling kids their first home in new areas south of perth. its my sons business. so i just help. lol
see ya.
John Hood says
Hi Jon, My Sister lives in the UK and a while back I was talking to her about things in general and we got onto the housing market. She said that they have a scheme over there called Rent to Buy which is apparently aimed at anyone wanting to get into the Housing Market. I haven’t looked into how it works e.g Is a portion of the rent is used to start purchasing the house? So that is one possibility, KEEP UP THE GOOD WORK WHILST i DON’T ALWAYS AGREE WITH WHAT YOU SAY. I THINK IT’S GREAT THAT YOU SAY IT AS “YOU” SEE IT. Best Wishes Regards John
Roger says
I doubt that they will do anything about it but STAMP DUTY is one of the biggest contributors to our ridiculous house prices. That coupled with an aged pension scheme that rewards retirees that hang on to their million dollar homes. There are a host of retired or soon to be retired folk around the country that would like to down size, but the cost of stamp duty and the pension system stop them from doing it. Cap the family home at say $650,000 for pension concession purposes. Give retirees a last home buyers grant (LHB) that enables them to avoid stamp duty when they down size into retirement villas or the like. Just as in Qld currently, as a FHB purchasing a home under $500,000, no stamp duty is charged. This would free up a lot of large and well located homes for the next generation. Stamp duty needs to be abolished, as it was supposed to be back in 2000 with the introduction of GST. A broad based land tax would be much more equitable and would also force developers to release the vast amounts of land that they are sitting on collecting economic rent from and causing a false shortage of developable land. Everyone keeps banging on about how much house prices have increased in the last decade or so but vacant land has increased at a much greater rate and that is the real cause of housing inflation. It has been estimated that fees and charges from the three levels of Government ( and therein lies another problem ) contribute up to 38% of the cost of a new home. I really don`t think the problem is too hard to solve we just need a Govt. with some TICKER that will take steps, that may not get them back in power at the next election, but would solve the housing affordability crisis, and it is a crisis, especially if you are under 40 years of age. The next generation ( Millennials ) are the most pessimistic about their future. Lets face it if you can never see yourself as being able to buy your own home, then the future is not rosy. You would not consider yourself as living in THE LUCKY COUNTRY. That is very sad for our great country. Come on Pollies, MAKE AUSTRALIA AFFORDABLE AGAIN
Tim says
At the end … Australia needs more jobs. Make Australia great again!