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First home buyers could soon use superannuation to buy property; Nick Xenophon will introduce legislative changes in the spring session of parliament
Topic Started: 28 Jul 2014, 05:33 PM (16,481 Views)
skamy
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It would be inflationary to access super for deposits no doubt about that. However if fhb could use their super instead of copping LMI that would be a zero sum game for the buyers and sellers. In other words if they could use their super as a bond to reduce the need for LMI. Only the banks and insurance companies would miss.


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The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
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skamy
11 Aug 2014, 09:38 PM
It would be inflationary to access super for deposits no doubt about that. However if fhb could use their super instead of copping LMI that would be a zero sum game for the buyers and sellers. In other words if they could use their super as a bond to reduce the need for LMI. Only the banks and insurance companies would miss.


A fine idea as long as everything works out for the FHB. As you say, it's somewhat less price-inflationary, and removes a dead-weight RE transaction cost that hits FHBs particularly hard.

But it's a disaster if the pseudo-LMI guaranty actually gets exercised against the FHB's super. That would involve allowing a creditor to access funds that were accumulated on a tax-sheltered basis, and the ATO would immediately want its pound of flesh from the FHB as well, compounding the financial duress.

There's a reason that the ATO forces SMSF superfunds to mortgage RE purchases on a non-recourse basis, and it's to avoid exactly that situation.
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New Zealand's experience shows that tapping super is unlikely to improve affordability

Claire Matthews | 11 August 2014

New Zealand's experience shows that tapping super is unlikely to improve affordability

Independent Australian Senator Nick Xenophon is planning a legislative push for first home buyers to be able to access their superannuation savings to pay for a house deposit, mirroring a similar policy in Canada.

As with Australia and Canada, home ownership in New Zealand continues to be seen as a birthright and there is concern about home affordability as house prices, in the main centres at least, continue to rise.

When New Zealand’s workplace-based retirement savings scheme - KiwiSaver - was launched in 2007 the government included several incentives to make the scheme more attractive. One of these was the ability to withdraw contributions to enable the KiwiSaver member to purchase his or her first home.

The government also offers a first home deposit subsidy of NZ$1,000 per year of KiwiSaver membership, with a minimum of three years and a maximum of five years. Both benefits were in response to concerns that the deduction of KiwiSaver contributions from a young person’s pay packet would restrict their ability to get on the home ownership ladder.

How it works

Withdrawing savings for a first home becomes an option after three years or more of KiwiSaver membership. The member’s own contributions can be withdrawn, along with those of their employer. However, the government’s contributions, comprising a NZ$1,000 kickstart for new members and a member tax credit of up to $521.43 per annum, cannot be withdrawn.

The availability of the deposit subsidy is more restricted, with limits on income and the maximum purchase price of the property. Both benefits are only available for the purchase of a first home, with very limited exceptions, and never for an investment property.

These incentives were important in making the controversial scheme more palatable to the public. However, research has shown these incentives are less important to KiwiSaver members than the other government incentives. (Although this is likely to reflect the fact that many members will have already purchased their first home).

Incentives aren’t helping affordability

The benefits for first home buyers do little to assist with home affordability, which relates to the ongoing cost of home ownership. The latest report from Massey University’s Real Estate Analysis Unit found home affordability across New Zealand had deteriorated by 7.6% over the year to May 2014.

The benefits are also likely to have limited impact on house prices overall, particularly given the purchase price restrictions associated with the deposit subsidy. Certainly no restraining impact has been indicated, with house prices continuing to rise and ongoing concerns of a housing bubble in New Zealand.

While the benefits could also potentially help push prices up by increasing demand from first home buyers, there is no evidence this has occurred. The purchase price restrictions associated with the deposit subsidy will help curb any potential inflationary impact on house prices. The persistent increase in house prices, particularly in Auckland, continues to be driven primarily by immigration and speculation.

However, KiwiSaver’s first home benefits do assist New Zealanders into their first home by helping them meet the minimum deposit levels required to be able to obtain a loan, something made more difficult with the introduction of loan-to-value ratio (LVR) limits by the Reserve Bank of New Zealand in October 2013. (This has meant that 90% of a bank’s new home loans require a deposit of 20% or more).

The most recent figures available pre-date the LVR changes, but show that more than 10,000 New Zealanders withdrew savings of more than NZ$120 million from their KiwiSaver accounts to assist with their first home purchase in the year to March 2013. In addition, nearly 5,000 subsidies worth more than NZ$15 million were provided in the year to May 2013.

While it’s likely some KiwiSaver members have simply taken advantage of the availability of these benefits, for many young people they will have been vital to helping them achieve their goal of home ownership.

It could be argued that allowing withdrawals from KiwiSaver accounts defeats the purpose of retirement savings. While we know that the earlier you start saving the better, the reality is losing three to five years’ worth of contributions at a relatively young age will not be a disaster – and the retention of the government contributions means the member does not go back to square one as a result of the withdrawal.

Helping young people to help in retirement

While the lifetime benefits of renting versus home ownership continue to be debated, the New Zealand Retirement Expenditure Guidelines identified the financial benefits for retirees who own their own unencumbered home, compared to those who are renting. This suggests assisting young people to make their first home purchase will provide benefits for them in the long-term, and improve their retirement prospects.

Another reason to support home ownership is that it provides more secure accommodation for families, compared to renting. Fundamental changes to the property rental market in New Zealand would be needed to change this.

However, there is a large difference between a 25-year old withdrawing three years of contributions and a 50-year old withdrawing 10 years of contributions –the latter will be significantly disadvantaged in terms of retirement income. To counter this it would be sensible to restrict the withdrawal amount or the age at which withdrawals can be made from the scheme.

While the ability to use KiwiSaver savings to achieve a greater level of home ownership has been a successful policy in New Zealand, there is a strong case for introducing some limits to protect its underlying focus on retirement.

Read more: http://www.propertyobserver.com.au/forward-planning/investment-strategy/politics-and-policy/34340-new-zealand-s-experience-shows-that-tapping-super-is-unlikely-to-improve-affordability.html
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Rational Radical
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Hi guys,

I just signed up to APF, and so missed this discussion until now. I'm one of many young Australians currently locked out of home ownership by record high prices. Everyone here is obviously aware of what a terrible (and questionably motivated) idea this is, and I don't have a lot to add to the expert analysis of many of the folks here and on the blogo-sphere who's writing I rely on to inform my understanding of these issues.

However, given that this will inevitably spark another discussion about housing affordability when the idea hits parliament, I've started a small petition to try and steer Nick towards advocacy for some reforms that might actually do something - such as quarantining of negative gearing or limiting to new builds, which seems to keep floating around in the back rooms of power. If we can convince him to publicly get on board such a move, we could possibly make a positive change for the first time in decades (ever?).

So I ask humbly for your support of my petition to have Nick Xenophon scrap this plan, and force him to address the real causes of and solutions for unaffordable housing. It's an important cause that affects at least 4.5 million voters (particularly young Australians), and one that has for too long been a vexed issue thanks to conflicted and gutless politicians. My (admittedly lofty) aim is to generate some media exposure of the truth about housing affordability and the dubious proposal being put forward by Nick Xenophon. I wand to send a strong message that young people will not be taken for fools on housing yet again.

Link to the Petition:
http://goo.gl/KMRMGK

And here are the original posts if you want to share, retweet or like them. Or tweet something to #PetitionNickXenophon.

http://twitter.com/RationalRadicaI/status/498981159125020674
http://www.facebook.com/rationalradicaloz/posts/635566369883967

My sincere thanks in advance, and if you sign, please also pass onto as many of your friends and network as possible - and millions of young Australians will be grateful if we can pull something off.

Sincerely,
Matt Ellis.
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Rational Radical
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Hi guys,

I just signed up to APF, and so missed this discussion until now. I'm one of many young Australians currently locked out of home ownership by record high prices. Everyone here is obviously aware of what a terrible (and questionably motivated) idea this is, and I don't have a lot to add to the expert analysis of many of the folks here and on the blogo-sphere who's writing I rely on to inform my understanding of these issues.

However, given that this will inevitably spark another discussion about housing affordability when the idea hits parliament, I've started a small petition to try and steer Nick towards advocacy for some reforms that might actually do something - such as quarantining of negative gearing or limiting to new builds, which seems to keep floating around in the back rooms of power. If we can convince him to publicly get on board such a move, we could possibly make a positive change for the first time in decades (ever?).

So I ask humbly for your support of my petition to have Nick Xenophon scrap this plan, and force him to address the real causes of and solutions for unaffordable housing. It's an important cause that affects at least 4.5 million voters (particularly young Australians), and one that has for too long been a vexed issue thanks to conflicted and gutless politicians. My (admittedly lofty) aim is to generate some media exposure of the truth about housing affordability and the dubious proposal being put forward by Nick Xenophon. I wand to send a strong message that young people will not be taken for fools on housing yet again.

Link to the Petition:
http://goo.gl/KMRMGK

And here are the original posts if you want to share, retweet or like them. Or tweet something to #PetitionNickXenophon.

http://twitter.com/RationalRadicaI/status/498981159125020674
http://www.facebook.com/rationalradicaloz/posts/635566369883967

My sincere thanks in advance, and if you sign, please also pass onto as many of your friends and network as possible - and millions of young Australians will be grateful if we can pull something off.

Sincerely,
Matt Ellis.
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vdmruss
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Rational Radical
19 Aug 2014, 12:37 PM
Hi guys,

I just signed up to APF, and so missed this discussion until now. I'm one of many young Australians currently locked out of home ownership by record high prices. Everyone here is obviously aware of what a terrible (and questionably motivated) idea this is, and I don't have a lot to add to the expert analysis of many of the folks here and on the blogo-sphere who's writing I rely on to inform my understanding of these issues.

However, given that this will inevitably spark another discussion about housing affordability when the idea hits parliament, I've started a small petition to try and steer Nick towards advocacy for some reforms that might actually do something - such as quarantining of negative gearing or limiting to new builds, which seems to keep floating around in the back rooms of power. If we can convince him to publicly get on board such a move, we could possibly make a positive change for the first time in decades (ever?).

So I ask humbly for your support of my petition to have Nick Xenophon scrap this plan, and force him to address the real causes of and solutions for unaffordable housing. It's an important cause that affects at least 4.5 million voters (particularly young Australians), and one that has for too long been a vexed issue thanks to conflicted and gutless politicians. My (admittedly lofty) aim is to generate some media exposure of the truth about housing affordability and the dubious proposal being put forward by Nick Xenophon. I wand to send a strong message that young people will not be taken for fools on housing yet again.

Link to the Petition:
http://goo.gl/KMRMGK

And here are the original posts if you want to share, retweet or like them. Or tweet something to #PetitionNickXenophon.

http://twitter.com/RationalRadicaI/status/498981159125020674
http://www.facebook.com/rationalradicaloz/posts/635566369883967

My sincere thanks in advance, and if you sign, please also pass onto as many of your friends and network as possible - and millions of young Australians will be grateful if we can pull something off.

Sincerely,
Matt Ellis.
A sound effort, but this will accomplish nothing.

Nick Xenophon is just a tiny piece of the puzzle.

Removing negative gearing would be a disaster if it were implemented tomorrow.
Let me assure you that this isn't one of those shady pyramid schemes that you've been hearing about. No sir, our model is the Trapezoid which guarantees each investor an 800% return within hours.
Those who can, do. Those who can't, teach.
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Bardon
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All of these schemes to create affordable housing are a myth. All that happens is that it provides buyers with more funds to bid up the price and the economic rent takes the gain.

I am all for the super funds being made available for this.

Lets hope that the other Senators give Nick the thumbs up on this as a way of currying favour with him for his support on upcoming marginal issues.
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miw
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Bardon
21 Aug 2014, 10:32 AM
All of these schemes to create affordable housing are a myth. All that happens is that it provides buyers with more funds to bid up the price and the economic rent takes the gain.
Absolutely correct in my view. You can't make something seem cheaper just by giving people more money to buy it.

What is needed is to make new stock seem cheaper so that an oversupply gets created.

Obviously one way would be to get rid of developer contributions and instead collect that money out of a broad-based land tax like rates. That would immediately drop the median house price by about $25k.

Another way would be to accelerate depreciation on new builds so you you have to own the place in, say, the first 10 or 15 years of its life to benefit instead of 40.

I'm not necessarily advocating these steps. Not sure it makes sense to encourage malinvestment, which is what these would effectively be doing.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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Bardon
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miw
21 Aug 2014, 03:50 PM
Absolutely correct in my view. You can't make something seem cheaper just by giving people more money to buy it.

What is needed is to make new stock seem cheaper so that an oversupply gets created.

I think the RBA is trying to do this now.

Either way I would like to see super funds enter the market.
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Trojan
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Bardon
21 Aug 2014, 10:32 AM
All of these schemes to create affordable housing are a myth. All that happens is that it provides buyers with more funds to bid up the price and the economic rent takes the gain.

I am all for the super funds being made available for this.

Lets hope that the other Senators give Nick the thumbs up on this as a way of currying favour with him for his support on upcoming marginal issues.
Its a sleight of hand.
The FHOG and allowing FHB to use super is just to provide the FHB with a comparative advantage.
Exhibit A: watch the FHB fall over themselves to outbid other buyers when they doubled and tripled the grant.
Buyers aren't interested in houses being cheaper nationwide - they are only interested in getting ahead themselves. And politicians know that very well.
And yes I agree, giving buyers more money will have an inflationary effect on house prices.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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