14 February 2007

Gazza wants to buy ever more expensive houses for doctor's wives.

| johnboy
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Our Liberal Senator Gary Humphries thinks young people are frittering away their vast earnings because it is “unfashionable” to save money according to the ABC.

Taking his logic a bit further; because of this slavish devotion to fashion they are unable to buy a house, get married and start squirting out children like decent Australians should.

He has a great solution to the problem though! He wants the Government to co-contribute taxpayer dollars to those young people who are wealthy enough to put money into savings accounts rather than spending it all on food, rent, and a skerrig of happiness! (He specifically cites as a *good thing* the superannuation co-contribution scheme whereby the spouses of the wealthy who can make voluntary super contributions get a bite out our hard earned cash)

Helping the wealthy young and the children of the wealthy into the last few rungs on on the property ladder and squeezing out the rest, bloody great policy Gary!

UPDATED: Gary’s media release is now online for those who wish to see his thoughts unadulterated by the peanut gallery.

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Or even, your tax contribution was used by the Government for them to put you in a government supplied house if you so chose to take up that accommodation option.

Kind of like Matrix, only a little roomier.

VYBerlinaV8 now_with_added grunt4:26 pm 15 Feb 07

Maybe federal govco could set up provisions for ‘house savings accounts’, where the $$ go in pre-tax, like superannuation. Allow only for first home, make people pay the tax if they change their mind, etc….

You’d see some deposits appear then, methinks…

West_Kambah_4eva3:56 pm 15 Feb 07

link to Age blog

“In 1960 it required 3.5 years income to buy the average Australian house. Currently it takes 8.5 years as indicated by the housing affordability index.”

VYBerlinaV8 now_with_added grunt3:45 pm 15 Feb 07

I think you’ll find rental prices have a fair bit to do with investors. With everyone saying that housing is waaaaaay too expensive, everyone wants to rent. And what do you know, demand goes up and price follows. The solution? Find a way for more people to buy houses.

(Or don’t – as a property investor I am happy to keep taking your money)

Maybe if instead the government readjusted investment incentives so that residential property wasn’t as effective (vs. commercial property, shares etc.) then we wouldn’t have as many asshat investors jacking up the price of housing and rental.

I’m still at a complete loss to see how large scale investment in residential housing is supposed to be good for the economy.

The 1st home buyers grant jacked up prices alright – but not to the extent that the 7K could not help to pay for a deposit/stamp duty/legal fees/etc. It pushed prices up, but it put much needed cash in the hands of first-time buyers – like me, who would have had a much harder time buying without that little push along.

The problem is, VY, that house prices are so high that saving a reasonable deposit has become so onerous that people look at the years of penury they’ll have to endure (often after the penury of study/apprenticeship) and say “Nah, stuff it”.

I don’t think it’s prudent – but I can see why they do; especially when the culture of the day is “Have it now! Don’t think! Buy on 87 years interest free!”

VY – No investor in their right mind is going to bid up the price on a property deliberately, but they simply have more finanical grunt than a first home buyer. It has an overall effect on the market – not an immediately obvious one, but a significant one nonetheless.

VYBerlinaV8 now_with_added grunt2:55 pm 15 Feb 07

MOst investors I know don’t try to outbid each other – they would rather pick up the properties that for whatever other reason don’t sell easily, so they can secure the property for the least possible price.

50 Years ago a new migrant who secured an ordinary job on ordinary pay could soon hope to buy an ordinary house and then upgrade but those days are long gone.
The deregulated banking industry has flooded Australia with cheap cash, 100 billion plus, a very high portion which property investors have at their disposal (as well as property tax concessions) to outbid the rest of the interested onlookers.
Watch the prices reach astronomical figures when two or more investors fight on.
The home owners grant just made prices increase by more than 7 thousand dollars overnight.

VYBerlinaV8 now_with_added grunt1:10 pm 15 Feb 07

And….DING! Mr Shab hits the nail on the head.

In other words, consumer items are cheap (so people can afford and will buy them) and houses are expensive; so no-one could be arsed saving because there are more gratifying things within easy reach.

VYBerlinaV8 now_with_added grunt1:02 pm 15 Feb 07

Housing, like everything, is cyclic. There are times when it seems cheap, times when it seems expensive. Doesn’t matter when you buy if you hang onto it for a while.

In all the noise of house prices, we forget that some other things are very cheap by historical standards. Like cars, electronics, flights, …

West_Kambah_4eva11:46 am 15 Feb 07

Saving, shmaving. Saving is meaningless next to the real point: the average property price in relation to the average wage. It used to be that you could buy a 4 bedroom house for 2 months pay, now its, like, a billion months. Plus university and healthcare should be free. And bacon.

VYBerlinaV8 now_with_added grunt11:16 am 15 Feb 07

Thumper is spot on about the saving thing. The reality is that most people spend what they earn. Earn more and the lifestyle expands accordingly, earn less and the lifestyle contracts.

Our parents advice was to “live within your means”. Better advice is to “live below your means, and save or invest the difference”.

Some of the very wealthy (and conveniently anonymous) who live in this country used some very creative saving methods when they were younger. Personally I think “not being able to save” has more to do with justifying lifestyle to oneself, rather than reality. Look at many of the migrants who came to Australia in the last 50 years – they get crap jobs and crap pay, and yet many of them seem to be reasonably well off by the time they retire. Interesting.

Our unis are moving slowly towards a similar system, however it is being motivated more by the failure of the school system to teach basic reading, writing and maths. So it is moving more towards 1st year of uni being remedial studies – what should’ve been taught in high school.

Yes Shab, there is merit in the US model of vertically integrated health care as well.

No, only your ID card.

Badda boom.

Unless you’re MacGyver, not especially.

Higher education will not save you, unless you can alchemetically produce biofuel for use in the Thunderdome.

Also, find yourself a nice bladed weapon and put it somewhere you can find it later – high powered weaponry will only last so long.

Agree, JB. I like the US system of undergrad generalisation and postgrad specialisation. I find their system of student loans disturbing from a social cohesion standpoint, not to mention an individual one.

Fewer young lawyers is also a laudable idea (I just hope Mrs Shab isn’t reading this…)

Actually in the USA the profit motivated unis require a generalist undergrad degree before they allow students into the money courses.

This gives them a much more broadly educated professional class AND less young lawyers.

Two top outcomes there…

the accessibility of decent student financing to do the degrees is the tricky bit.

Ralph is that your way of saying you’ve changed your mind?

Yay! Copy the US! Remove most of the financial incentive to go to uni (unless you’re studying Med or Law with a view to working for a big law firm).

Remove medicare too. Just makes people lazy.

Yep – the market will always provide. People acting out of self-interest always make the right choice.

Education is a form of saving. Yes they are living below the bread line now, but by investing in themselves they will earn high incomes when uni is finished (depends on what they’re studying of course).

They get more than enough government welfare as it is. In fact if we slash that altogether we could move to a model like the US where there is an established market for student loans (this is already happening to a lesser extent in Australia).

The article is about ‘youth’. Many of them are studying in order to get better jobs.

But with the rental marketthe way it is, anyone paying rent who is not on a good income will not be saving much money.

This scheme would benefit ‘youth’ who are working and living at home, and noone else.

It is always the way. I still remember years ago going from Austtudy to the dole for the month before I got a job, I was told I had to wait 13 weeks, despite having rent to pay and no income. My friends who all lived at home got it straight away cos they had listed ‘debts’ on credit cards from their recent European holidays. Unbelievable.

West_Kambah_4eva9:09 am 15 Feb 07

I knew we shouldn’t have built that damn statue… oh, hubris! Ye have shown your ugly head! Tell us who to smite and they shall be smoten!!

Thumper – renegotiate your mortgage. The first home buyers grant applies to first time applicants – and if this is your only home in your portfolio, it’s the equivalent of your ‘first home(that you have applied for the grant)’.

This is a loophole that was put in place for those people who had already brought a heap, and were in the process of doing it up in order to upgrade.

I think it’s more that first-home buyers are disadvantaged over second-and-subsequent home buyers in the market (given that second-home buyers do have a previous home to borrow against).

Of course, one could be cynical and think that it might act as a somewhat unnecessary government subsidy of an already overenthusiastic property market, but that would assume that goverments give cash to people who don’t need them. And that never happens, as we all know…

Under the Thumper savings plan only one person in the country will have a job. But at least they’ll be saving.

VYBerlinaV8 now_with_added grunt8:04 am 15 Feb 07

Welfare goes to the rich now anyway. My wife and I got the baby bonus 18 months ago, and there is no way our incomes should have allowed that to happen. That said, I considered it part of my tax return and took it gladly.

There was a time when welfare was to help those who needed a hand up. Now most families get some form of govt assistance. Running and distributing welfare costs us about 35% of the yearly tax take, I think.

Here’s a novel idea seepi, how about they get off their backsides and study to get better jobs.

So lets give the welfare to those with the most money?

Effing brilliant!

“Many young people, because of all of those pressures on them and costs rising, simply wouldn’t be able to participate in a scheme like that because they wouldn’t have any dollars at the end of the week or the fortnight, or the month, in order to gain the benefit of it,” she said.

Perhaps that’s because they spend all their money on alcohol, smokes and new tyres after doing burnouts behind my house.

They only people who dont have capacity to save are those on welfare – and to them I say get a job.

Non rich kids don’t have a lot to spare after rent, bills and food. As pre the last 4 paras of the article:

But ACT Youth Coalition director Meredith Hunter says many young people do not have the capacity to save.

“If we look at some of these other things like youth wages, HECS debts and rising rental prices, along with the other sort of household bills that people have and the costs of those, then that would probably go a long way to young people being able to have a few dollars at the end of the fortnight to put into a savings account,” she said.

Ms Hunter supports Senator Humphries’ proposal but says the Federal Government should focus on addressing those rising living costs.

“Many young people, because of all of those pressures on them and costs rising, simply wouldn’t be able to participate in a scheme like that because they wouldn’t have any dollars at the end of the week or the fortnight, or the month, in order to gain the benefit of it,” she said.

JB is right on this. All the empirical evidence overseas has shown that schemes that top up peoples saving and pension funds have primarily been taken up by spouses of high income earners.

Have read the ABC blurb a number of times and still can’t see how this only assists ‘rich’ kids

If savings incentives like this are implemented, it will not do jot to help minimum wage employees who spend 100% of their salary just surviving.

If the state governments get rid of stamp duty, the price of houses will just rise by the same amount.

I say release a crapload more land onto the market, and let supply/demand take care of it.

Ingeegoodbee6:13 pm 14 Feb 07

I would have thought that some sort of joint equity arrangement would have been better than doling out our taxes to first home buyers. At least with joint equity the Government would have a share in the investment – that would form an incentive to manage the economy properly and keep interest rates down.

The tax free threshold in Australia is $6,000.

Most Australian’s don’t even notice it happening, because in tax/income terms, it’s peanuts.

VYBerlinaV8 now_with_added grunt2:59 pm 14 Feb 07

8 years ago – I wish! I bought the house about 5 years ago (which admittedly was a cheaper time to buy than today). For many people the only option is to save what they can, and take a low (or no) deposit loan.

A friend who just got back from the UK was telling me that over there you can invest 7,000 pounds per year with no tax implications (not sure exactly what this means). Perhaps the Australian govt should consider this type of approach. Basically giving those people who save for a defined minimum period in an approved account some sort of tax benefit (other than super, that is…).

I agree Mr Shab.
Putting aside 20% (if youre lucky) of your after tax salary these days will not get you anywhere near buying a house as quickly as it would have 5 or 6 years ago.

Jeeze – houses are really friggin’ expensive. How much more incentive to people need to save money for a deposit? How come the only incentives that are ever suggested seem to involve shovelling out yet more middle-class welfare?

VY – I hear ya, but buying a house 8 years ago, and buying one today are different propositions. Kudos to you for being financially prudent at a young age, but I’d suggest that financial prudence has lesser rewards than back then.

if he was serious about home affordability, perhaps reviewing stamp duty might be beneficial – oh wait that won’t happen.

How about we take away some of his wage each fortnight to support this new idea of his and see how he likes living and trying to get aheads on an average wage!

What a complete tosser!
Dont those with silver spoons in their mouths have it good enough already?

Freaking ridiculous!!

JB, I agree with that comment. I save (what I can) But it’s not anything major. I do my best each year to get 1000 into super, so the government gives me a free 1000. It’s probably better to start it now while I can still get it.

While I can see his point to make it an incentive, one must surely agree there is better places our money can go.

I applaud people who choose to save, but giving a Government handout to people already able to put money aside seems like a poor use of resources IMHO.

VYBerlinaV8_now with_added grunt10:25 am 14 Feb 07

How many young people genuinely save hard these day? I remember starting my first professional job at 23 years of age and copping crap from all directions because my wife and I were saving hard for a house deposit, and living fairly simply (I was earning about three quarters of the average Australian full time wage at the time)

“You’re too young to worry about that”
“You’ve got ages”
“You’re only young once”
“You should be focussing more on fun”
“You’ll earn more when you’re older, worry about it then”
etc, etc…

On hindsight, those three lean years set us up. I wouldn’t change a thing, even if I could, because of the benefits we are enjoying now (at age 31).

I would advise anyone who is saving hard to ignore the knockers – your tomorrow will be much more comfortable than theirs.

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