26 September 2007

Housing Affordability Bill Passed

| OzChick
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The Housing Affordability Bill was passed yesterday allowing First Home Buyers to defer their stamp duty for 5 years.

However as with most things there is a catch with this scheme, interest will be charged from the time the stamp duty debt has occured, and the debt has to be repaid within 10 years.

The bill can be seen

I don’t see that this scheme is very affordable for new home buyers as they will end up paying more than the stamp duty that they are liable for.

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They cancelled it again then. I bought a house well after that and never got a grant.

The first home buyers grant (or an early version) was bought in late 1994 or early 1995. I know because I bought my first house in 1994(100m2 on a 400m2 block with no curtains nor landscaping). Did the old family fools and friends to get the deposit while raising a young child did not get a grant. Then about 2 months after moving in the ACT Government bought in a scheme.

Ol Kate had a sign put up telling everyone how generous they were with my money. The sign was visible from my new unsubsidised bedroom – then they doubled it!!!!!!

That’s alright the ex-wife got the whole house and all our assets in the settlement – so it was never my house anyway.

Gungahlin Al5:22 pm 26 Sep 07

One often overlooked aspect of these schemes is that they all focus on first home buyers. But anyone who has been out of the property market since around 2001 is likely in the same boat but they get no help.

It’s not a simple problem to solve at all. Removing all government assistance will make very little difference either way (for the same reason that introducing it made very little difference).

The root of the problem is supply and demand – demand (made up of both investors and owner-occupiers) in this case outstripping supply. A facet of the problem that can’t be ignored is the extremely low occupancy rates and high rents in rental properties – this is why any purported solution that seeks to reduce investor demand for properties won’t work to improve housing affordability (for example phasing out the rort that is negative gearing). If investment properties are made less attractive then rents will have to rise, which will push more renters into buying, which will neatly cancel out the lost demand from investors.

The only solution which makes sense is to increase supply. However, land releases alone won’t do the trick, because you need the building industry to turn greenfields sites into houses – and the building industry, like our economy in general, is capacity-constrained already (that is, a lack of workers and logistics capacity like transport links to supply material prevents the industry from scaling up output).

So it seems to me that the only logical way to improve the housing affordability situation is to do three things together: increase land releases; bring in migrant/temporary workers to increase the capacity of the building industry; and fund infrastructure improvements like port and rail link upgrades.

Yep, that’s a great way to screw the entire economy up – start imposing restrictions on lending.

We used to have controls on lending back in the 70s, before we deregulated the financial system.

As a first home buyer out there looking property at the moment, this may mean we can actually afford something!
It would help us out because we are easily able to service a mortgage, but due to ever increasing rents we are unable to save a decent deposit.
Unfortunately we are not eligible for the first home buyer stamp duty concessions. We earn more than $100k combined which rules us out. And we would also not get a concession if the property costs more than $365k … which is just about every 3 bed property in Canberra!

We are only prepared to borrow what we can afford to pay, factoring in a couple % rise in interest rates as a buffer. Unfortunately we are competing for houses with buyers who are prepared to over extend themselves, thereby driving up house prices to a point where we can barely afford even a basic 3 bed house within 25kms from work.
I would like to see the govt regulating lenders so that there is a fixed limit to the amount people are allowed to borrow (say 3.5 times their annual salary) which would hopefully lead to price reductions.

Couldn’t agree more. Get rid of red tape at least, and then let the market sort it out.

The best way to increase housing affordability is to get rid of all government assistance. It due to silly schemes such as the first home owners grant that has made it easier for people to get finance and as such increased the demand on housing and pushed up the price. If they do anymore to increase this the situation is only going to get worse. And then on top of this you have the equally silly baby bonus which in effect does the same thing.
Now we are starting to see loan defaults and housing repossessions and the bleeding heart people come out and tell us we should stop this happening. But at the end of the day its things like this sad though it is which will help bring the price of housing down.

VYBerlinaV8 now_with_added grunt4:34 pm 26 Sep 07

Woohoo! Anything that increases demand for property (as this will), increases the value of my investment properties!

It also ignores the time-value of money (money you have to pay in 10 years time is inherently worth less than money you have to pay today).

Perhaps if they called it “indexation” rather than “interest” (like HECS/HELP debts)?

FC: It’s income tested, as well as tested against the purchase price of the property, if I recall, and those tests rule out a good chunk (I’d guess even a majority) of first-time buyers.
As for paying “more stamp duty than they’re liable for”, that’s like saying taking out the home loan makes them pay more for the house than it’s worth – perhaps technically true, but kind of missing the point of a loan.

I thought that first home buyers only had to pay $20 stamp duty.
That was how it was last year when I bought.

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