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Monday, March 09, 2015

Cheap housing idea splits the Liberal Party

JAMES LAW news.com.au March 10, 2015 10:47AM IT’S the idea that could make buying your first home much, much easier. Prime Minister Tony Abbott and Treasurer Joe Hockey have both enthusiastically spruiked the concept — but only a few months ago one of their closest colleagues absolutely trashed the idea. After releasing the government’s intergenerational report last week, Mr Hockey said Australians should be given flexibility to use their superannuation in new ways. He went so far to suggest that younger people could be allowed to dip into their super savings to buy their first home. Mr Abbott has supported concept, telling reporters yesterday that it was a “perfectly good and respectable idea” that had worked well in other countries, such as Singapore. “It is something that I am very happy to see further debated but there are obviously some issues around it, and let’s fully consider it,” he said. REIQ generic house sale Joe Hockey and Tony Abbott have floated the idea of allowing Aussies to dip into their super to pay for their first home. While the PM and Treasurer have been publicly endorsing the proposal in recent days, the idea of messing with Australia’s mandatory saving scheme was summarily rubbished by one of their closest allies within the Liberal Party only months ago. News.com.au asked Finance Minister Mathias Cormann in October whether the government thought the idea of allowing people to dip into their superannuation funds to buy their first home had merit — and his response couldn’t have been clearer. “No we don’t support this idea,” Senator Cormann told news.com.au. “Superannuation is a tax effective savings vehicle designed to help people fund their living costs in retirement. “Increasing the amount of money going into real estate by facilitating access to super savings pre-retirement will not improve housing affordability. “It would increase demand for housing and, all other things being equal, would actually drive up house prices by more. That is, it would reduce housing affordability, including for first home buyers. “The only effective way to tackle housing affordability is by boosting housing supply, not by boosting demand.” They are cigar-puffing buddies when it comes to Australia’s Budget, but Joe Hockey and Mathias Cormann don’t see eye to eye on Australia’s superannuation system. Picture: Gary Ramage Senator Cormann was asked 2GB radio yesterday afternoon whether the idea was merely Mr Hockey’s “thought bubble”. “Joe said that we should have a conversation about how we can put ourselves onto a stronger foundation for the future, given the ageing of the population, given the changing nature of our careers over a much longer period of time. We need to have the conversation and then we can make some informed judgments at the end of that process,” Senator Cormann told Ben Fordham. But he stopped short of endorsing the concept. “Home ownership is very important and it is something that we should continue to encourage. When we look at house prices though, prices of anything are a function of supply and demand and what we have to be careful of is that we actually fix the problem and don’t exacerbate the problem. By increasing demand, in the end with supply staying the same, you will be at risk of pushing up prices further. The only way to really sustainably bring down housing prices and make housing more affordable is to ensure that supply keeps up with growing demand,” he said. These comments, which came from Mr Hockey’s right-hand man on Australia’s financial management, are much closer to a stinging attack by former Labor prime minister Paul Keating published today in The Australian Financial Review. Mr Keating, who was prime minister from 1991-96 and introduced compulsory super in 1992, wrote that allowing people to take money out of their mandatory savings for property or training would “amount to the destruction of one of the best retirement systems in the world”. “What would the aged-care budget with the baby-boom bulge look like without the supplementary income from superannuation savings? It would be a horror story,” Mr Keating wrote. PM Tony Abbott says the superannuation for housing idea is “perfectly good and respectable”. The Labor Opposition and industry groups have also criticised the idea, saying it would actually push up house prices and erode retirement savings. Shadow treasurer Chris Bowen has mocked the concept as a “thought bubble” that would only harm the superannuation system. “We need superannuation more than ever before because we are living longer,” he told ABC radio. “It could have the perverse impact of making housing affordability worse and undermining retirement incomes for people on lower and middle incomes.” Treasurer Joe Hockey has called for Australians to be given for flexibility in how their super is used. Last year, South Australian independent senator Nick Xenophon pushed for Australia to explore adopting a scheme similar to Canada’s Home Buyers’ Plan, which allows residents to withdraw funds up to $25,000 in a year from their retirement savings to buy or build a home. The Canadian scheme has been operating for 22 years with about one-eighth of first home buyers aged 25 to 44 participating. Generally, withdrawals have to be paid back into the retirement funds within 15 years. Similar schemes have also been successful in Singapore and New Zealand. Do you support the idea of allowing people to use their super to pay for their first home? Comment below or tweet @newscomauHQ. Originally published as ‘It would be a horror story’ ==================================================== Charles 31 minutes ago We look at this too much as a supply side issue. Why not reduce demand? 1) Negative gearing for investors buying an established house - get rid of it 2) Allowing non-residents to purchase property (and then land bank) - Get rid of it 3) Paying Grandma and Grandpa Joy and Joe an Aged Pension while they continue to live in their 5 bedroom million dollar plus home on half an acre in prime real estate - down size down size down size @Andrew So Andrew, do you think that in 30 years time you will sell that house for $4.35 million? I would imagine there would have to be a pretty signifcant spike in Salary/Wages over the next 30 year sif that is the case. Invariably, spikes in Salary/Wages also lead to signifcant increases in interest rates. Could you imagine paying for your $4.35 million house on Average Wage paying interest at 18% per annum. The mathematics of the whole equation will fall over eventually. Or, Wages will catch up. ------------ John 18 minutes ago @Graham Interesting, I would also like to see limits placed on foreign ownership and negative gearing which I believe was 1985, I gather that is part of what you mentioned above. Force developers to supply the land within time certain time frames once development approval has been granted, rather than hold on to it to artificially limit supply. It is mostly the cost of land that has caused so much increase rather than the actual bricks and mortar. Think about that most of the Grands could of lived in that home for years upon years and to tell to move so we can build 4 units on it, I think that is a bit rich, they should be able to live in the home that they most likely raised their children in. Remember it is more than just a house but has become their home. The Liberals never invest or do anything about housing... they want their wealthy supporters to own the houses and rent them and claim a tax break.... The concept has worked great in So galore for many years. The house be ones the best possible asset, especiLlh when you downsize as you get older. Certsiy worth exploring the numbers. Time to become apolitical about issue. --- maxine 28 minutes ago @Charles negative gearing works for some and not for others. totally agree with non residents land banking and the concept of down sizing is where you would withdraw your super!! thats what no one is getting based on this forum. those that don't acquire real estate could remain in traditional super --------------- Matilda 29 minutes ago @Charles To reduce demand, why keep trying to accommodate up to 2000 new residents in Victoria each week? If governments stopped tweaking our demographics, we may find a way to have affordable housing, and stop pandering to the wealthy property investors. Most of our growth is due to immigration, so the immigration tap should be turned down to 1990s levels, and not the full thrust we have now. This is like moving the deckchairs on the Titanic! Moving money from one savings into another is not about making money more available, but shuffling. Superannuation is for retirement, so what happens when more people need pensions in the end because their super is insufficient? If Hockey really wants to make housing more affordable, he's stop propping up the housing Ponzi pyramid of heavy demands, and celebrated record prices! Housing has become a major industry for Australia, and it's about satisfying investor, not providing homes for us all! If demand was turn down, by releasing the throttle on our population growth, then more houses would be affordable and available. What is "affordable"? Houses are not meant to be "affordable" but to maximize profits for investors! There's a cyclic argument that we must keep building houses for our projected population growth, but population growth keeps getting boosted to keep up demand for houses - and prices! If Hockey really wanted to make houses affordable, he'd fix what's keeping prices high, not expect buyers to sacrifice their retirement for a roof over our heads? -------------- maxine @Matilda no, the full thrust was when we opened the flood gates to the boats!! thank god thats been restored to none!! @Bob Up less risk than share market… remember what happened to baby boomers when share market hit the skids…wasn't pretty and retirees were forced to go back to work to sustain their living. All because its been paid in doesn't mean it will get paid out. No super fund offers a guarantee of minimum deposit secured…read the fine print!! all your lives work and super safety could amount to zero!! Real estate will always end up the most secure of options… even then the market turns, you don't have to sell and can wait for recovery. In 2010 we had a 11% down turn made up by a 26% increase over the last 5 years with a 16% growth (already started) anticipated for this year even with foreign investment tightened… which super offers that consistent return for the duration of your life?? not many - none actually!! its called mortgage insurance!!and income protection!!well currently if you experience hardship you can apply to dip in the equiv of 12 months payments from your super through DHS. there is also redundancy cover available with income protection insurance as i mentioned above, your super is not guaranteed! not even initial investment…super isn't fool proof. but the property market never has and when it corrects, it restores. Super is primarily invested in share markets where you get no guarantee of even withdrawing your lifetime initial investment. Have you read the fine print?? you could work for 45 years and withdraw 0 you bet your retirement daily. its not guaranteed to perform or be there when you retire! but its not a silly idea when you com are risk & growth.. as long as there are boundaries and rules in place, it could work better than current system or at least give people a choice. isn't that what everyone wanted… to be heard, to be a voice?? Brainstorming came up with the best ideas in the world!! Hello Apple, Hello Facebook…list goes on and on! Some of australias best inventions we're done in a garage between mates having a tinny of fosters!! check out how many became exempt form paying hecs and what is has cost the tax payer in the end. those that haven't used their qualification and don't have to pay it back make it our bill that we pay for!! we are one of the few countries that have affordable tertiary and uni education. overseas, each institution offers student loans at discounted or no interest rates and then it doesn't become the tax payers burden totally has merit with the right foundations laid… historically melbourne real estate doubles every 10 years no understanding of the property market which poses less risk than super $$ being tied up in shares which can be much more volatile!! who brought in the 1st home owners grant?? and what Unions made building investment cheaper?? safer in property than a volatile share market where your lifetime of contributions could amount too zero when you choose to retire!! Eva thats what they declare affordable housing. next round gets built at better value and doesn't help values of the last round. Blue chip offers the strongest growth 10km from the city doubling every 10 years on average!! Andrew correct… there are actually some great coastal towns that are getting ready to increase infrastructure with established housing that is yet to but ear marked to boom in the next decade! check out the east coast between venus bay and 90 mile beach!! its set to do same as dromana to portsea old inner city factories have value in their land and most are privately owned. central equity did that but focused on student accom unfortunately --------------- Timothy The property market has been increase at the same rate over the last 100 years, with ups and downs, but in the end it all works out at the same average increase. It's got nothing to do with investment and people need to pull their heads in and buy where they can afford, not where they want. The biggest thing that saved this country from the worst of the GFC, is that we have a shortage of housing. Also what about when they retire and don't have a home of their own they are worse of as they need to pay rent or purchase a home then. This isn't a new problem, people will always be faced with this dilemma, people need to set them selves for the future, make extra repayments when time are good and have a safety net when these things arise. ---------- Andrew Affordable is what you can afford even if that is a shack with a 90 min commute for work. Don't expect a mansion in the inner city. People with large property portfolios started with what they could affor and expanded as their investment grew. Ha ha do some research before you buy and make sure you get all the inclusions. Ever heard of a turn key package? If not do some research. And be prepared to move to buy a house you can afford, even if that means interstate or stop complaining and rent for the rest of your life. ----------- Bob Up Silly idea. Super must be treated as sacred until retirement. Pensions will be nothing in a decade or two so every dollar in super counts. It is more important to have as much as possible when you are young to allow the greater benefits accumulate. I think it silly because like everything else it will be abused, and wreck super. On the other hand, home ownership, by way of reverse mortgage, can and does fund retirement. If this scheme does come in it should be on the proviso that the funds, plus interest, has to be repaid when that home is sold.The fund can be treated as a second mortgage. My comment didn't compare super V housing as an investment. If you read it carefully though I elude to the concept that (like housing) super is a long term return. What fine print should I be reading? I do think though that you misunderstand what I was getting at. People are, and will be the problem, not the markets. We all know you have to say that, but although I disagree with it, there is still some merit in it. -------- Shirley @maxine What happens when the interest rates inevitably turn or unemployment continues due to manufacturing closing? Can you sit on your homes then when the banks come knocking? Mortgage insurance is there to protect the lender!! It doesn't save housing prices from falling when economic circumstances change. 16% growth in the next 12 months is simply not going to happen. With respect to unaffordable housing, both sides of politics are as guilty as sin. Both have allowed foreign investment to keep pushing up housing prices away from young Australians. They continue with this because they know all other facets of growth in this country has stalled. There is an issue when a foreign investor is allowed to build 50+ homes in less than 3 years. We now have this housing bubble that is red lining and at the very least a correction is in stall. The RBA is now backed into a corner. Lift rates and watch struggling couples hand their house over to the banks or lower rates? Lowering rates will mean that unemployment has risen again and more homes handed over. Yep I'm a novice at this game, but it's crystal clear to even me. I'm a rusted on LNP voter but even I shake my head at Joe Hockey who describes talk of a property bubble as lazy journalism. To even think about allowing super to be used on housing is lazy governing Joe. ----------- Aussie So you need to pay a monthly/annual "fee" to insure that you don't lose your overpriced home if you come into financial difficulty in old age, bought about by using your super to buy your home? This is suddenly going from a "one time" dip into the super into an ongoing payment issue. I would rather not bet my retirement on the value of a house that is not certain to go up. Interest rates go up, a majority of people will face some hardship. An overpriced market only has one way to go- down. They throw out these ideas to gauge interest. If it's overwhelmingly negative, they toss it and say it was just an idea. This way, they can say they never made any negative changes. @maxine @Aussie @Shirley We are not talking about young people losing jobs here. We are talking about people dipping into their super to pay for a first home, possibly struggling to pay it off before pension age due to chronic overvaluing homes. You want them to then take out another 12 months of super to pay for the hardships? What if there is none left? And even then, expecting young people to dip into their super to access emergency cash funds (because the LNP wants to stop young people from accessing support payments for 6 months) after they get made redundant is double dipping again. Especially if they've just used 40 grand of that same super to buy a house and then found themselves without a job after being made redundant. I find your comments absurd. It's the classic case of "oh well, it's not me". If it was, you would see these problems instead of thinking it's fantastic. Because they are clearly targeting the wrong people, Natasha. If young people are paying off $100,000 in HECs debt, they will be forced to dip into their super to get a deposit on a house. Then they don't have super any more when they get to 80 and there will be hardly any pension left to support them. The young people will also be scrimping with disgusting cost of living rises, paying extra to see a doctor after the LNP demolishes Medicare. There are a hell of a lot more people in this country doing it tough than there are who are well off and yet those who are well off seem to be getting all the breaks from this government. I guess Smoking Joe is out for the big banks again with this, the people who will benefit when the lower classes start defaulting on their loans in old age. So by choosing to use my super as intended- for my retirement!- instead of on a deposit for an overpriced home that is worth double what it should be, I will be further behind my friends who will follow this plan just to get a foot in the door? It's just going to create a vortex where people will feel forced to give up their super to get a home because they won't be able to compete any other way. The only question is, what is in it for the LNP? I can only think of literally working the lower classes into the grave. That first home buyers bonus is the only thing keeping some of us in the race to own a home. Knowing that $10,000 of the $40,000 we need is provided, it's a massive help. Why should people have to uproot their lives by moving interstate to buy a house? I bet no one said that to you when you purchased your first home and I bet it never crossed your mind that you needed to. "It's OK, it's not me, therefore not my problem" is a terrible mentality to have. --------------- Rob these young people who have a HECS bill better have some money at retirment, otherwise they've studied for a long time for no reason. They should have decent jobs to accumluate a decent retirement amount. --------------------------------------- Chris 28 minutes ago Its not the cost of the house pushing prices up its the cost of the land. $ 250,000 for the block and the same for the house and your already at 1/2 Million. No reason for the land to be that dear for standard residential developments. Try $ 50,000 tops that would make a big difference. Of course some land would still have the top dollar price tag on the coast or upmarket suburbs but for standard residential development no way. Its not like we are short of land. ----------------- Bruce Bruce 39 minutes ago Home buyers who have taken mortgages on these record low home loans are going to wish they hadn't later on down the track. They may be lucky for a long time though as our great country that really didn't even flinch in the GFC,mainly thanks to China ,is going to be in the duldrums for quite a while I think you will find Singapore workers have to put 30% of their wage in Super. Cant use Singapore as an example as many families all live together ,plus welfare like in Australia is non existant. The Canadian one said money had to be paid back into super within 15 years.I suppose you could get another loan,or if finally retired sign the bit of paper for reversal loans. ------------------------- Lorna 56 minutes ago The IGR says that we will be poorer in the future and have to work harder because of the high cost of an "ageing population" and their health care and pensions. Now, Joe Hockey is saying that people now should access their superannuation to help buy a house! That means more pensions down the track. If Hockey really wanted to make housing affordable, he's tone down the demands that keep outstripping supply. Tax breaks, high population growth and negative gearing! ---------------------- Matt 58 minutes ago Here's an idea. Why not look at who is purchasing housing in Australia. For the average young family/couple it is impossible to enter the market whilst paying other expenses. I think the government needs to crack down on overseas investors flooding the market and driving house prices up. There's no point building more housing as the infrastructure doesn't support that growth ----------------------- Seamus 1 hour ago Property always goes up. LOL. From 1890 to 1950 property did not go up (Real Terms). From 1951 to 1970 property did not go up. From 1974 to 1987 property did not go up. In fact virtually all property growth in Australia in the last 125 years has come since 1996. This conveniently coincides with First Home Buyer Bonus, record low interest rates and Foreign buyers. ALL the actions of governments who think it is their duty to create property growth. This is but another example. it will end and it dramatic fashion when rates double from current levels. Real terms = after inflation. I recall inflation being pretty rampant in the 1970s. ------------------ Andrew 58 minutes ago Rubbish. House prices double roughly every 10 yrs otherwise I would have paid $34000 for a house like my dad did in 1974. Real terms is what you pay. My old mans house cost $34,000 in 74. Worth about $500,000 now. Real terms that what it cost then and now. Interest was 17% but a house cost about double your yearly income then as opposed to 5 x income today. It's all relative. My house $350,00 7 years ago now worth about $500,000. Spot on. No one wants to do the hard yards anymore. They want the mansion with all the trimmings first up. -------------------- Oopster 1 hour ago Might have had some success in Singapore where real estate is measured in sq-inches rather than metres. Singapore also has very low Personal Tax rates. It is a country of apartment living, only the ultra-rich have houses as we know them. This is very much a thought bubble that will disappear very quickly. Like the real-estate scams where people can buy a house they can't afford without even needing a deposit, it will result in mass repossession. The tried and true method of owning a house hasn't changed that much. Sacrifice and save for the deposit, buy within your price range, start within your means to get into the market, trade up when your first asset has increased in value and you are financially comfortably to go to the next level. If you can't afford a house without relying on super money that has to be paid back while servicing a mortgage, I'd suggest you can't afford a house. -------------------------- Terry One of the primary needs for comfort in retirement is shelter. Of course superannuation savings should be available for the purchase of the primary residence but how to do it? I would suggest a scheme run by banks whereby 100% of a persons superannuation is offset against a mortgage. Normal repayments are maintained with the bank covering its costs with a small profit, the balance of the interest charged is re-invested in the superannuation and is a dividend to the homeowner's fund. As to negative gearing, 2 negatively geared, investment properties OK, 10 negatively geared investment properties not OK. ------------------------------- Eva Just where do you people live? Maxine, Shirley, Bob Up, etc.... The Suburbs are becoming a nightmare! At Casey there are so many estates that no roads or freeways will be able to cope with it! Not to mention our water supply! There are a lot of 1st home buyers, mostly from overseas! The average house and land is over $450.000 or more. There is NO allowances made for the costs that Fences, Landscaping, Window Coverings etc...! Some of the purchasers never had a house, let alone know how to maintain one! Some windows have ugly rags and the garden is zilch! No price rises, but future ghettos! Some of these people earn $40-60 Ks a multitude of kids, and most of all they still want to travel back to their own countries! A lot of them are trying to sell there homes in less than 2 years! So why do we hand them our Taxpayers Money? Everyone is a First Home Buyer at the moment! The building industry is over heated Prices are not escalating, and out here Most people sell at a loss! So we are just following what has happened in America! Particularly as Jobs are getting none existent! The bubble will burst! But sadly we will all pay the price for the high class political idiocy! ----------------------------- Graham 2 hours ago MONEY SUPPLY IS THE PROBLEM... Since 1983 when Keating deregulated the financial industry, access to money became much easier. This is what has fueled the growth in house prices. The safeguards for borrowing were removed. Proper bank managers were replaced. Bank valuers were diminished and the valuation process watered down. Limits on lending were taken away. These are the matters that have created the world financial problems. Having the old limits on lending would have helped avert the current global problems. The FED GOVT should reintroduce some of the old safeguards on borrowing. First home buyers to 90%, next home buyers to 80%, investors to 70%, super funds either 0 or up to 30% max. Repayment limits as a % of wages should also be reintroduced, say one wage plus half of a second household wage. These suggestions will slow housing demand and create slower movement in the market. PS: I have been an agent for over 40 years in Melbourne and have seen all of the changes over that time. --------------------------------------

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