bcworld

Still confused. First home buyer? So it's their principal place of residence? So the NG bit is irrelevant. Or it's an investment property...in which case they are likely paying interest only?

So let's be clear, you are firmly in the camp then that NG must never be changed from its current implementation? It can't be very slowly grandfathered out of the equation as is being proposed by some?

Beoz

I wasn't referring to NG when I put those figures down. I didn't reply to anyone did I? I'm talking about the biggest risk of all - a interest rate rise.

On NG. It needs careful treading. But Labor are selling it as a way to make property affordable for FHB. Really? As I have said the only way to make house prices affordable is to smash house prices. Is Labors plan really going to do that? Do they really want to do that?

bcworld

I didn't say you replied to any one. The following line about how NG might be needed to save whoever it was from default after that 1% rise in interest rates seemed to link them but obviously not.

Personally I think over a very long period of time Labor's plan for NG will improve the picture for first home buyers. In the first instance though it would probably create a bubble as investors rushed to seal the deal before the 2017 deadline.

Beoz

But property prices need to come down 20% to make it affordable for FBH. What would be the adverse effecfs of that?

Beoz

Like the Libs plan which is "Build more homes to increase supply" Labor have their plan revolving around NG and CGT. Both plans address a number of important things like reducing NG or keeping the construction industry buoyant, but neither of which actually address the affordability issues for FBH. Both plans bank on prices remaining stable with no wage growth. How does that actually solve the problem?

Here is what Labor says - Like the Libs, they have missed the actual remedy. Either make property cheaper or throw money at the FBH.

For most young families in Australia, the dream of purchasing and owning their own home is almost completely out of reach.

Working and middle class families are increasingly being priced out of the housing market. Ownership rates for young people aged 25-34 have spiralled downwards in recent years from 60% to 48%. Young people are being forced to take on levels of debt unimaginable just a few decades ago.

With first home buyers making up just 1 out of 7 of all home purchases, we have to do better. It’s well and truly time someone did something about making housing more affordable in Australia. That’s why Labor has announced a policy that will help level the playing field for first home buyers competing with investors.

Labor will reform negative gearing and the capital tax discount effective from 1 July 2017, a policy which will help put the Australian dream of home ownership back within the reach of middle and working class families.

Swerv-o

Herein lies the real problem. So much Australian investment - both personal and institutional - is tied up in real estate that no government wants to be the one that presides over even a moderate fall in house prices. If they do, they will be out of power for a generation.

and this is why some/many choose to call it a ponzi scheme - because prices need to be kept up to satisfy investors rather than FHBs. Unfortunately, you need the FHBs to come in at the bottom to keep the chain moving along.

I think that Labour's solution is too much sharp shock, whereas the Liberal solution is do nothing. Somewhere in the middle would be ideal.

Maybe a phased reduction in the CGT benefit would be a better approach - maybe reducing by 5% a year for the next 5 years. Perhaps a direct tax at the point of purchase of investment properties? Or limiting - as other countries do - tax deductions to the asset that generated them, rather than general taxation.


S

Beoz

Agree. The ramifications to the overall economy would be massive.

Well the independent reports say that it might only see a 2% decline, which really isn't that much of a shock but 2% does nothing to help FBH. So in actually fact all it does is start the migration away from NG, which isn't a bad thing, but does nothing to help the intended target - the first home buyer.

I don't think a phased reduction is going to help much either - if there's no shock, 2% drop is hardly a shock, but it certainly goes someway to minimizing our reliance on bad investments.

A direct tax at the point of purchase is where I'm thinking too. That direct tax is used to support first home buyer schemes. There are currently schemes in place but they are useless, and funded by the states.

In NSW for example they are limited to $750,000 new builds. Where all those new builds are going up in Waterloo and the like - you can't find a new build for under $750,000.

They are really just there to support FBH in out lying locations.

Swerv-o

Those new builds in Waterloo are crazy - talk of Hong Kong type housing density there in 10 years time. Already Zetland is a soulless sea of high rise Legoland apartments - some of which banks are now declining to lend on because of questions over build quality and long term endurance. So many people packed in with next to no facilities - very few shops, cafes, restaurants, bars etc. Utterly devoid of life.

Agreed with the initial direct tax - a 10-15% impost on investment properties/second homes etc that is levied at a federal level and used to support FHB benefits. But do the FHB benefits indirectly contribute to hose price growth as sellers factor it into their asking prices?


S

bcworld

This sounds more 'sharp shock' than a gradual removal / descoping of NG to me!

Swerv-o

Tax - it's the language governments know best


S

Beoz

There's still so much building going on there. I think at the end it won't be too bad. If you don't mind the high rise living you won't mind living there.

But you are right, I think they will end up plummeting in value. It might see that $750,000 come into play

Good point. I guess it will come down to a supply and demand thing again. Sellers just can't whack on a price increase without the demand.

Its all about changing the buy type proportions. You would hope that a 10-15% tax on investors will kill off a few investors and bring the FHB into the market if they were given a benefit to buy.

Oddly my landlord tried to put up our rent recently. Rents aren't going up in Sydney much - 2%. After much negotiation we just said we would move as the cost of the move to us would be equivalent to a $7 a week increase. I threw him a couple of examples of rent numbers in the area. In the end, the cost of re-letting for the landlord would have been in the order of 2-3k and therefore - no rent increase. You can't just throw these numbers up without the market dictating so.

Beoz

How does the descoping NG help the FBH - isn't this the issue here?

Grattan Institute backs Labor's negative gearing policy | afr.com

Less than 2% forecast by this mob.

This turns a $750,000 property into $735,000 ........ not exactly a changing the affordability.

Beoz

Stay away.

Real estate: Apartment loans in ‘risky’ NSW, VIC, QLD suburbs, blacklisted by Macquarie Bank

Interestingly, this is probably an area that's going to need a tool like NG to encourage investment.

the troubadour

Those that got us into this dire position should be trembling in fear of public retribution.

the troubadour

Those that got us into the present mess should be trembling with fear at public retribution. Instead their solution being to offer more of the same.