With more and more Australians now believing the great Australian dream of homeownership is out of reach, and with the federal election coming up in less than a week, both major political parties have now addressed the affordability challenge experienced by first homeowners.
Each party is approaching the problem in different ways, but if either scheme gets implemented, there could be significant consequences for property values in the short term.
Prime Minister Scott Morrison has also announced a scheme to encourage older voters to right-size their homes and put more money into their superannuation.
I discuss the implications of this with Australia’s leading housing economist Dr Andrew Wilson, chief economist of My Housing Market on these proposals in this week’s Property Insider video.
Super Home Buyer Scheme
This week Prime Minister Scott Morrison is betting the house on a super play promising that if re-elected first home buyers would be able to contribute up to 40 per cent of their superannuation, up to $50,000, in the Super Home Buyer Scheme.
There is a reasonable argument that because compulsory super is now taking 10% of a young person’s wage, it’s a lot harder for them to buy a home than it was for baby boomers, many of whom had no super until 1992 when Paul Keating made it compulsory at 3% of their wage.
The policy applies to both new and existing homes, with the invested amount, as well as a portion of any capital gain being returned to their superannuation fund when the house is sold.
The Super Home Buyer Scheme has no income or property limits; however, it is only available to first-time homeowners who have saved five per cent of the deposit independently.
It must be an owner-occupier purchase and the purchaser must live in the house for at least 12 months.
Couples may both access the scheme if eligible, one member not being eligible does not stop the other from being so.
Any capital gain associated with the first home investment would be exempt from tax on repayments to their superannuation fund, with the scheme to be administered by the ATO.
The problem is relatively few FHBs have up to $50k in Super and they can only borrow 40 so really need close to $120k in super to get maximum benefit.
The ABS suggests that the median super balance for 25-34 year old's was $25,000 in 2019-20. 40% of that is $10,000.
- Also read:8 ways into the property market with a small deposit
- Also read:10 most expensive suburbs in Melbourne
- Also read:10 most expensive suburbs in Sydney
- Also read:Latest property price forecasts for 2022 revealed. What’s ahead in our housing markets in the next year or two?
- Also read:The Prime Minister is betting the house on new incentives | Property Insiders [Video]
Even those who do still need a sizeable additional deposit in most cities. Given this, not sure that the take-up will be that big, but it will bring forward purchasing.
Superannuation investment for downsizing
This week Scott Morrison proposed a “right-sizing” policy for Australians over the age of 55 who would be able to downsize their homes and contribute up to $300,000 from the profits of a sale to their superannuation fund, outside the existing contribution limitations.
This scheme is now only accessible to Australians over the age of 65, but this change would make it available to up to 1.3 million households and would begin on July 1, 2022.
On January 1, 2023, a re-elected Coalition government would begin doubling the time pensioners have to arrange their assets following the sale of their family home without affecting their pension to two years.
Labour has indicated they will match this Coalition proposal.
National Weekend Auction Report 14th May 2022
Dr Andrew Wilsons’ Auction Insider reported that capital city auction clearance rates were mostly steady at the weekend despite a predictable surge in pre-election day listings - and the impact on buyer and seller confidence of the recent shock increase in official interest rates.
The national auction market reported a clearance rate of 71.4% at the weekend which was similar to the 71.3% reported last weekend but lower than the 80.8% recorded over the same weekend last year.
Clearance rates however remain at near this-year-so-far lows.
National auction numbers predictably surged at the weekend as sellers avoided the distractions of next Saturday’s Federal Election.
2372 homes were reported listed compared to the previous weekend's 1667 and similar to 2401 reported over the same weekend last year.
READ MORE: 8 Property trends we can expect in 2022
