I’m betting on more government cash for the property market in a few months.
One of the things that every Federal election has given us in recent times is some sort of cash-splash for property.
The tone and timbre has changed a bit. It started at as raw grants for first home buyers. By the last election it had morphed into a first home buyer deposit scheme.
Some single mothers were able to access properties with a 2% deposit, thanks to government help (which I think is fantastic policy by the way. Nothing sets you up for life like housing security.)
So now we’re looking down the road, a little way into 2022, and we can see there’s another election coming.
Are we likely to see more cash for property?
I actually expect it to be big.
This is driven by two things. First, it’s driven by a government on the ropes that is likely to throw money at any popular cause they can find.
And nothings been a consistent vote winner like property.
Secondly, affordability is becoming a hot-button topic again.
The RBA was covering it in detail the other day. They note that with rising prices, the house price to income ratio has taken a stiff leg up.
Mortgage serviceability hasn’t changed all that much, thanks to falling interest rates. In fact, serviceability expenses remain well down on where they were in the 2000s.
And housing loan repayments as a percent of disposable income, have remained largely unchanged for a decade (except when disposable income tanked when Covid first hit).
So the interest expense isn’t the problem.
Where first home buyers are struggling is with the deposit. Average deposit sizes have spiked significantly.
And with that, the average time to save a deposit has blown out as well.
So that’s where first home buyer pain is – with the deposit.
And that’s a pain that gets spread around, since first home buyers often end up hitting up their parents for help with the deposit.
So this seems like a likely target for government spending – more measures that help with the deposit side of things.
One of the things I would note though is why this is all true of the market over all, when you break it down into detached housing and units, a bit of a different story emerges.
And that is that affordability has significantly worsened for detached houses, but for units?
Not so much.
Look at the price to income ratio:
Or years to save a deposit:
This makes me wonder if we might see some measures to encourage young buyers out of the suburbs into the unit markets, since this is where you could actually shift the needle on home ownership.
Maybe we might see more concessions on stamp duties for off-the-plan apartments or something like that.
We’ll have to see.
But however it plays out, I expect to see more money gushing property’s way.
As if there weren’t enough drivers lining up behind property in 2022.