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?
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.
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.
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?