If FHB's are serious they will save the deposit. Banks and Mortgage Insurers want to see 5% in genuine savings for high LVR loans. Having a 5% deposit but no savings history isn't enough.
I think that it's a bit pointless, on one hand it adds to the deposit but on the other it adds to the commitments as the buyer replaces that $25K over 15 years, if that's the model they follow.
I would rather the funds were used to buy a share in a house like an EFM or be used to clear a loan in the case of older borrowers.
Any expressed market opinion is my own and is not to be taken as financial advice
Except that young people don't have much savings in their super. Unless by 'young' you mean early 30s.
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Why should people have to take on more debt earlier in life
Why indeed? Well, the economic argument is this: Dear young people, fuck you.
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It's no co-incidence I think that Australia's private superannuation pool has grown almost in lock-step with our aggregate household/mortgage debt levels.
A better plan would just to abolish the superannuation scheme altogether. We would all be a lot better off economically, and the government would immediately see it's tax revenues grow by around $3B per year. The whole scheme has been a dismal economic and fiscal failure.
Perhaps a smarter approach would be to allow the super fund to 'invest' in the PPOR up to a certain limit, say 20% (for example). The super fund then acts as an owning party, perhaps even receiving rent.
Perhaps a smarter approach would be to allow the super fund to 'invest' in the PPOR up to a certain limit, say 20% (for example). The super fund then acts as an owning party, perhaps even receiving rent.
That's sort of what I was getting at too... Either an equity type arrangment where the fund owns a percentage of the property and receives that percentage on sale in the future.. (negating the "rent" issue)
or you can have the fund buy the property and you rent it off your fund. (if sufficient funds to buy outright)
Massive
28 Jul 2014, 09:13 PM
conversely having your money in a fund as early as possible should make for better gains in retirement through compound earnings...
unlocking your super will just mean people will likely put down more which will take just as long to pay off, with same amount of interests and risk entering retirement worse off - especially if their property doesn't see good capital gains..
cant see a problem with people controlling where their super goes - and splitting it over various properties if they choose, but putting it all in the family home , will a-drive up prices, b- encourage joe blow to throw all his finances and financial future into his PPOR...
eggs in one basket is not often a recommended investment strategy
with my suggestion though, the fund buys the house and you then rent the house of the fund, you then have a property and a cashed up super fund on retirement.
One could also do something really readical and save/invest outside of the super arrangement as well....
There are some people who seem angry and continuously look for conflict. Walk away, the battle they are fighting isn't with you, it's with themselves.
The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it. The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.
Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
Independent Senator Nick Xenophon wants the rules changed to allow first home buyers to pull money from their superannuation savings for a house deposit.
The South Australia Senator says a scheme now operating in Canada, allowing up to $25,000 to be accessed, has lead to improved housing affordability. In Canada the amount has to be paid back into the super fund within 15 years.
“With more and more Australians finding it difficult to break into home ownership, adopting the Canadian scheme would make a difference to many thousands of Australians each year,” he says.
He will introduce legislative changes in the Spring session of federal parliament.
In Australia, first home buys are being squeezed investors, local and foreign, and a two-year run in rising prices.
House prices are way above historical averages, according to a report by the International Monetary Fund which places Australia third among developed nations on the ratio of house prices to incomes, and fifth on house prices to rents.
A Senate Economics References Committee hearing in Adelaide today was told by HomeStart Finance, an arm of the South Australian Government, there’s something strange about being able to access a super fund if you are about to default on your housing loan, but you can’t access it to put a deposit on a home in the first place.
While my initial reaction was certainly to say otherwise, I believe it's a good move - Primarily because I believe Super as we have it now isn't a good thing.
And that said, as a Capitalist, be aware that I also believe that if you fuck up your finances for retirement, then on your head (primarily) be it ...
A Professional Demographer to an amateur demographer:"negative natural increase will never outweigh the positive net migration"
My primary concern is that it will be inflationary. Any increase in access to money for FHBs in Sydney at the moment will simply inflate prices, then it is of no use at all for the following cohort of FHB. It has only added to their problem.
Definition of a doom and gloomer from 1993 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.
Should the federal government allow first-home buyers to access their superannuation savings to pay for a housing deposit? Only if they want housing affordability to deteriorate further.
But that is the proposal that Independent Senator Nick Xenophon plans to introduce to parliament. His inspiration is a similar program operating in Canada, called the Home Buyers’ Plan, which Xenophon claims has "made a dramatic difference for housing affordability there".
"With more and more Australians finding it difficult to break into home ownership, adopting the Canadian scheme would make a difference to many thousands of Australians each year," Xenophon said.
It is good to see some concern about housing affordability from Xenophon, and it’d be nice to see more concern from some of his colleagues. But improving housing affordability cannot be achieved by increasing the demand for housing.
This policy proposal would have a similar effect to increasing the First Home Owner Grant (FHOG). Although quite popular, that scheme has been an unmitigated disaster that has effectively operated as a wealth redistribution vehicle from younger to older Australians.
At the very least it has done nothing to boost home ownership. Ownership among 25 to 34 year olds has fallen from over 60 per cent in 1981 to around 48 per cent in 2011; for those between 35 to 44 years old, ownership rates have dropped around 10 percentage points over the same period.
According to the Council of Australian Governments (COAG), the FHOG has encouraged first-home buyers into the market but that hasn’t resulted in greater home ownership. Instead it simply brings forward those purchases, leaving ownership rates effectively unchanged.
Of more immediate concern for housing affordability is the fact that the FHOG quickly becomes incorporated into price expectations for existing property. In the short run, the supply of housing is largely fixed which naturally results in higher prices. Consequently, these policies merely create the illusion of greater affordability and fool younger Australians into taking on a considerable debt burden.
On that basis, Xenophon’s plan will surely fail to put a dent in our housing affordability crisis. Such a plan has also failed -- contrary to his claims -- to improve affordability in Canada.
Housing in Canada is arguably more expensive than in Australia and housing affordability is poor in both countries. The International Monetary Fund (IMF) noted that Canada was one of just two OECD countries with a more overvalued housing market than Australia.
It is also undesirable for younger Australians to risk their retirement savings on a single asset. Our superannuation system plays a very important role in our retirement plans and that shouldn’t be compromised simply to bid house prices increasingly higher.
If Xenophon is serious about addressing housing affordability -- and I hope he is -- then there are a range of policies he could pursue. If he wants to boost home ownership he could look at reforming our overly generous negative gearing scheme (Why negative gearing is Australia’s biggest policy failure, July 9).
If he wants to reduce prices and demand then he could lead the push for greater capital requirements on Australian banks or macroprudential policies, which would put a speed limit on the amount of risky lending that our major banks can undertake (Murray must address the moral hazard in housing, July 16).
If he wants to reduce prices and boost construction, then he should be lobbying his state government to ease the supply-side restrictions that artificially reduce land supply and boost prices.
It is time our politicians -- at both the state and federal level -- began to take housing affordability seriously. If housing becomes too far beyond the reach of younger Australians then the inevitable result is a correction that could wreak havoc across bank and household balance sheets and the broader economy.
The simple reality is that the people who cannot afford to buy a house now will eventually become the same people who dictate house prices for the entire country. On that basis alone, housing affordability will eventually ease regardless of policy but that transition will prove a lot less painful if our state and federal governments take a more proactive approach.
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