Joe Hockey raises prospect of first home buyers using super to enter property market; Joe Hockey's plan for early access to super appeals to the young and the Greens
Tweet Topic Started: 6 Mar 2015, 06:31 PM (10,964 Views)
I think if a person puts their "super" into a new build then no problems.
Peter
Agree that putting it into new builds would not be a problem in a flat market but in a booming market like Sydney it could lead to the kind of speculation that caused problems in economies like Ireland.
It is really a terrible idea otherwise as it will just lead to a transfer of wealth from non homeowners to home owners.
A better idea would be to allow young people to use super to avoid LMI, ie they could use their own super as a guarantee to get 10% deposit rather than paying the banks heaps in this new highly profitable insurance of LMI.
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.
Are they really considering letting young people access their super to buy their first home? In case you missed it, Treasurer Joe Hockey is said to be seriously considering the matter and it makes my TV interview with Assistant Treasurer, Josh Frydenberg, tonight even more important!
As home prices rise pretty rapidly, especially in Sydney, and with 9.5% of someone’s saving now compulsorily going to super, it really does make home ownership close to 10% harder than it was before Paul Keating sensibly forced super on us in 1992.
Over the weekend, someone I was talking to pondered how helpful that could be for say, a young couple, wanting to buy a property.
I replied — imagine if someone has an average salary of say $70,000 since age 21 and they’re now 30. That would be around nine years of super at about $6,000 a year. That’s $54,000 each, so we’re talking about $100,000 a couple, which could be a really goodkick along for a deposit and it would certainly help the goal of home ownership.
That’s the good side of the proposition. What about the negatives?
Banks and other super institutions wouldn’t like the loss of funds to property, though real estate agents would long love the name Hockey. There would undoubtedly be a stock market effect, as money leaves super funds, which had been invested in the stock market.
Developers would also love the idea, with an enormous demand likely for quarter acre block homes in outer suburbs and two-bedroom apartments in ring suburbs around the CBDs of capital cities. However, there’d have to be something seriously done about the government slug on developers trying to create supply for the obvious spike in demand for homes, if this Hockey dream came to reality.
I was told that if a newly developed and built house was sold for $300,000, then $100,000 would be government-related costs. Developers point the finger of blame at state governments and, believe it or not, recently I was told that the cost of a new project can be 50% government-imposed costs! Would a developer gild the lily?
Whatever the true figure, the super suggestion has to come with a big increase in supply, which would also help the economy — the house building multiplier for the economy is a strong one. Without a surge in supply, the inflation effect on home prices could be disastrous.
And then there’d be technically messy issues, such as what happens if you sell the property? What happens with a divorce? And you can bet there’d be a minefield of both normal life experiences and bureaucratic demands that would make this caring idea even more of a minefield!
What’s clear is this: anyone who opts for this early access to super will have a smaller nest egg when they retire. That means they’ll have to work longer — but that’s going to happen anyway — and they might have to be ready to trade back their property when they retire to bump up the sum of money they plan to live on after they stop work.
Provided the Government can address the negatives (and I’m sure there are more), then this is not a totally questionable idea. The fairness appeals, but the potential problems have to be fully comprehended and dealt with well in advance.
A while ago I pondered what measures would be taken to ensure prices continue to rise once making borrowing cheaper has become exhausted as an option - this would seem like an effective way to achieve it.
I don't think so. Here comes supply....
How much more will we need to see for significant price-dampening though b_b? Is that chart in absolute numbers? If it is then the supply response has not yet exceeded the one that occurred in the wake of Australia's last recession, when the population needing to be housed was significantly lower.
How much more will we need to see for significant price-dampening though b_b? Is that chart in absolute numbers? If it is then the supply response has not yet exceeded the one that occurred in the wake of Australia's last recession, when the population needing to be housed was significantly lower.
The chart is in absolute numbers and should not be compered to population growth but Household formation. Either way, the chart tells you the current (average) price for dwellings is now comfortably above replacement cost. This means at the current dwelling price, supply will be ongoing until the dwelling imbalance reverses (probably another 2 years or so). Importantly no amount of interest rate cuts, or accessing "superannuation" will prevent excess supply from pushing prices back below cost. This is why low interest rates and buyers grants in the US (post 2008) did not support US housing. Ditto Japan. Ditto most of Europe. Etc Etc.
Focusing on the demand side of the housing equation (either to push prices up or down) is a complete waste of time.
Monthly supply up 40% on a month-by-month basis (from the early noughties). Yes, population increased, but additional supply would not have been created unless there was a profit margin (price > cost). So, have interest rate cuts helped Perth?
This idea that Supply is "restricted" and demand factors cause bubbles is complete rubbish. Supply has always responded in Australia.
Bubbles are created and "pop" when there is a supply response.
Yes, a lot of arguments have gone back and forth as to what extent supply is actually restricted. Cameron Murray has argued that supply constraints are something of an illusion.
Does anyone think this has any chance of happening?
I pay 35% effective tax rate. If I could buy a house through my super fund, I would be paying it off with $$$$ that I paid 15% tax on, giving me a 20% better servicing ability.
This would mean I could get a house 20% cheaper than the dumbasses that are paying their mortgage with after tax income.
Even more awesome would be if the interest paid acts as an offset to the concessional cap, which would mean a massive tax credit for me if I could put 60K per year into super taxed @ 15% and get somewhere to live as well.
Maybe I should hold off. If the government is thinking this crazy now, wait until they go full retard! This might turn out to be the greatest tax minimisation scheme in Australia's history!
March 10, 2015 - 3:21PM Antony Lawes and Toby Johnstone
Treasurer Joe Hockey's idea of dipping into superannuation as a way to get on to the property ladder makes a lot of sense to first-home buyer Edgar Pottumati.
The 33-year-old who works in banking has been searching for a one- or two-bedroom unit for some time without success. The red-hot Sydney property market means prices around where he's looking in Parramatta and south Sydney are constantly climbing and that means saving ever more for that elusive deposit.
But if he could access the $50,000 or so squirrelled away in his superannuation, things would be much easier.
"I think it's a good thing [Mr Hockey's] proposing," Mr Pottumati said.
"The way prices are going in Sydney, first-home buyers have no chance at all of purchasing a property in the future. I can't think of any other way for people to get into the property market."
Given these difficulties Mr Pottumati said most first-timer buyers would support Mr Hockey's idea.
"I know a lot of people have quite a bit of super locked up and they're too far out from accessing it," he said. "They're thinking they could use it now. I think it's a good opportunity."
The dilemma faced by Mr Pottumati will likely resonate with would-be first-home buyers across the country, with prices increasing in all but one capital last year.
Mr Pottumati said the growth in property prices over the long term would offset any reduction in superannuation caused by withdrawing a lump sum for a deposit on a house or apartment.
"As long as they're willing to sacrifice that asset to fund their retirement I think they could be in pretty good condition," he said.
"You own an asset like a property in the long term, you're better off and if you look at the average return of the super funds at the moment you see that the real estate market is doing quite well compared to superannuation."
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