Hi
This is an intro from tonight’s ch 9 news in Sydney…
“A radical plan is being proposed by the NSW State Government .. to HELP people buy their FIRST home.
The idea is to let potential homebuyers “unlock” their superannuation .. in order to get that massive deposit.”
Obviously this mainly pertains to people trying to get into the Sydney market… what are people’s thoughts? I think it would open a can of worms, and create a heck of a lot of problems down the track…
Cheers
ractually i think it would be good for the young people, who may have 8 years or more of supperannuation, but lets say if you over 50 and you gonna retire in 15 years, i dont think it would be ideal, unless you are willin to work longer or if the pension is still around in the next 15 years.
But i do see it opening up a can of worms and may be a great idea to help people get there first home, but could create more problems instead.
cheers
s.i.sSave on a regular basis
“People forget that by saving just $3 per day and investing it sensibly over a working life, you’ll end up with around $1 million.”Hey guys
I think in the proposal you are talking about the gov’t has suggested restricting the superannuation option to just couples in their 20s and 30s and also the amount to just $20000. On top of that it recommends only allowing it for purchases under about $500000. I think that it is quite conscious of the fact that the FHBG didn’t really end up helping the people it was intended to help as the regulations weren’t tight enough.
Also it doesn’t was to try and stimulate demand any more than necessary as the RBA mentioned in its report to the productivity commission.
Soon the productivity commission is going to give its report into the first home buyer affordability problem and personally I think that 90% of the problem is cyclical, meaning that when the market comes back down to earth there will not be such a problem. And I think that the gov’t may believe this and just be doing these things like holding this commission and trying to talk down interest just to keep the public satisfied that it is doing something while prices are high without really intending to do much. (Also it doesn’t want interest rates heading north in an election year but thats another matter).But I do think part of the affordability problem is long term and if Australia is to maintain it’s high home ownership reputation then I think two things have got to change. Firstly stamp duty is simply too high and must be lowered and secondly negative gearing in it’s current form must go. I think it keeps prices at an artifically high level and rents at an artifically low level. So I believe neg gearing needs to be changed to be more like the american style. Keeping deductions in the same asset class is quite important I think. Obviously such a change would be very painful as it was in the US and for a short period in Aus but I think it has to happen and would be much better in the long term.Sorry got a bit sidetracked there but it’s just my two bobs worth regarding what should be done.
Richmond I think you are right in that it would open a can of worms regarding superannuation and perhaps set a bad precident. The way the gov’t is talking about doing it sounds pretty reasonable though i guess although I didn’t support it. I just think that it and many other ideas being thrown around by the gov’ts and the media are ideas that just come up in a boom and that in reality the market will sort itself out.
Yes thats right I am an economics student!
cheers
David“…secondly negative gearing in it’s current form must go. I think it keeps prices at an artifically high level and rents at an artifically low level. So I believe neg gearing needs to be changed to be more like the american style. Keeping deductions in the same asset class is quite important I think.
dglees 45, would you mind elaborating a bit about the American style of neg gearing? What is the difference between the American style and the OZ style?
Thanks, [
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HiThis is an intro from tonight’s ch 9 news in Sydney…
“A radical plan is being proposed by the NSW State Government .. to HELP people buy their FIRST home.
The idea is to let potential homebuyers “unlock” their superannuation .. in order to get that massive deposit.”
Don’t the federal government control super legislation? Regardless of what the NSW govt may propose, they’d need to get the federal govt to agree. I just can’t see that happening.
>>”…secondly negative gearing in it’s current form must go. I think it keeps prices at an artifically high level and rents at an artifically low level.<<
If people do not get a tax deduction then there will be a lot less rental properties available which in turn will lead to rent explosion.
A damned if you do and damned if you don’t situation.
Pisces133
A NSW government proposal eh ?
Just grandstanding as it is a Federal matter.
Must be an election coming up.Pisces133
Hi again
Celivia
I think that what was done in the US was that deductions were capped at a certain amount and the amount was dependant on your personal income. I have a feeling that no deductions are allowed if you earn over $100000. Not sure about that though. PeterM is right though in that rents would increase as they did in the US and even in Aus when Keating temporarily got rid of it.
PeterM
I agree with you on both fronts. Rents would increase quite alot and what more can you expect from the govt. Getting rid of neg gearing would have a massive effect on the market in the short term. Prices would also drop dramatically I believe as negative gearing “investors” bail out. I guess I blame neg gearing alot for the current bubble. If it were different then yields would never have been allowed to go as low as they have(or prices so high). If you read the RBA submission to the productivity inquiry then you get a good impression of the effect it has had on yields compared with other countries. Supply of rental properties would definitely drop as a result of such a change with quite harsh short term consequences but in the medium to long term I think more full time or as the RBA put it “Professional” investors would play a part in supplying property as yields increase and in the long term the market would sort out a new equilibrium(Although possibly with higher rents. My prediction would be a combination of higher rents and lower prices). I dont argue that this would not cause pain but would pretty successfully solve the affordability crisis I think.
Also just about the govt thing, any person or organisationwas invited to send in a submission to the inquiry and I think all state govts did so.
This article explains a bit about the whole idea.
http://www.smh.com.au/articles/2003/11/28/1069825991624.html
Cheers
DavidThey’ve had this in Canada as long as I can remember. You can borrow up to 20K from your RRSP (like the super) and have to pay it back in installments over a set number of years. Don’t now all the details, but it seems to have worked well. I have quite a few friends that have used it to purchase a house.
One difference – in Canada the RRSP is completely self funded – your employer does not pay into it.
Sheryl
One of the Spec home builders in WA has an idea that Super should be used for a one off purchase but if the property is sold the super portion needs to be re-paid to the fund together with interest at the current rate. Not a bad idea in my opinion.
Richmond Hi,
I think maybe not mainly the Sydney market as prices have soared in the large regional area where we live. About 16 months ago we settled on two houses which have both increased in value by $90000 and it puts it out of the reach of the first home owners. Same in all the towns an hour or two away. Unheard of up this way – units and houses $1M – mad.
I think that unlocking super for first home buyers is reasonable as with the cost of living, it’s really hard to save a large deposit and then cover the ridiculous stamp duty and other costs.
As Procrastinator said, it could always be paid back in instalments, but then there are years to accumulate super – maybe 30 or so and I know we encourage our kids, all with their own homes, to think about all aspects of investing for the future.Anna
It’s one of Carl Scully’s proposals. Agree with PeterW that it’s probably a bit of an attempt to make the federal government look like they’re not doing all they could.
Wouldn’t it just push prices up by the $20,000 cap (or whatever it is), though? Not really helping, if so.
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