Housing Affordability and Budget 2017

Housing Affordability Expert, Robert Snell says the wash-up of the latest budget measures means that “After they (young people) pay their rent and their increased HECs debt, there’s not much left to save for a home deposit and that the saving scheme is a band-aid solution to the gaping wound of housing affordability.”

“After they pay their rent and their HECs debt, there’s not much left to save for a home deposit.”

“Rising HECs fees further delay the ability of young Australians to buy and pay off a home.”

“With fees set to rise around $1250 to $40001 for an undergraduate degree it makes saving for a deposit harder. The average graduate salary of Sydney University $53,5242 so this means they repay the debt from their first day of employment. Increasing the debt burden further decreases Young Australians ability to save for a deposit and buy a home.”

“We want Young Australians to have vocational training at TAFE and University. More qualified, they’re more likely to secure better jobs. But at what cost? Increasing the debt burden on young Australians reduces their ability to save for a deposit and buy a home. If the government had set a housing affordability target, this policy might not have been implemented.”

“Increasing HECs fees delays the ability of young Australians to buy and pay off a home. If we really want to tackle home affordability we need to set a housing affordability target and create an authority to make it happen and take it out of the government’s hands. The current approach is fractured and we’re getting a fractured outcome on home affordability that is 12 times average earnings3 in Sydney. Anything above 3 times4 is considered unaffordable.”

Home affordability

“A band aid solution to the gaping wound of housing affordability. Whist there is a medium term focus on infrastructure, there needs to be a long-term view on fixing housing affordability.”

“Last night’s budget did not provide a solution for housing affordability. It’s a disease affecting all Australian capital cities. If we do not treat this disease it will lead to lower living standards and greater reliance on the government in old age. We need a long term solution to fix it that must start with setting a home affordability target overseen by a nation housing affordability planning organisation.”

Western Sydney

According to the research, all capital cities are unaffordable – the measures that say anything above three times earnings5 becomes unaffordable. Why is Western Sydney being singled out? The missing component is a housing affordability target. If you start with that target in mind, you develop policies that address the problem. This keeps young Australians in all other places very frustrated about not being able to buy and pay off a home. It needs to be an Australia wide solution – not just an 8 district solution.”

Super Savings Account

“A unit in Sydney might cost you $550k. A single person, will need to save a 20% deposit ($110k), Stamp duty (approx $22k) and legal fees (approx 2K), a total of $134,000. The First Home Saver Scheme might only afford a first home buyer $25,7606 after three years of saving. Fundamentally, when you have Sydney home prices 12 times average earnings7, this solution doesn’t solve housing affordability for Young Australians.”

“The First Home Super Saver Scheme places all the responsibility on the first home buyer. It doesn’t solve the underlying issue that the government hasn’t set a housing affordability target and developed policies from that objective. If we’re really serious about housing affordability, we need to start from that mindset not introduce a random change to superannuation or increase HECs debt.”

“The approach also assumes rising superannuation returns. What happens to a superannuation account savings if we have an economic down turn? I believe it’s going to be very hard for a qualified financial adviser to recommend this given it doesn’t really achieve a deposit outcome in a reasonable time frame. And if the superannuation rules change as a result of a change of government, will the client be able to access this money from their super or will they have to wait until retirement?”

“As a financial adviser, you’re breaching the government’s best interest test placing money into a high growth superannuation fund if you have time frame of 2-3 years. According to the rules you need a time frame of 7 years or more to be compliant.”

“Superannuation didn’t cause the housing affordability problem, so it’s hardly going to fix it. While the idea of having forced savings with some reduced tax benefit sounds positive on paper. Crunching the numbers though, it’s likely to only allow a first home buyer to save a fraction of the deposit they will need in a market like Sydney or Melbourne. We really need to set a housing affordability target and take it out of government’s hands to create a national planning housing authority.”

Bank tax and housing affordability

“The bank tax will be passed onto customers. This means that first home buyers are likely to pay more bank service fees and interest rates which also add to unaffordable housing concerns.”

Our housing affordability expert, Robert Snell has a personal challenge: To help 1000 young people buy and pay off their first home in 80-120 months. He believes that if you work in a city, you should have a reasonable chance to buy a home in that city and that rising home prices are not a sign of success – being able to house your population is. He feels at some point, a home must just be a home and not an investment if Australia is to continue to house its growing population.

Robert has been a passionate advocate for first home buyers for many years and has seen the challenges first hand with his client base. Parents of adult children and young adults themselves increasingly worry about how they will ever be able to afford to buy a home. He also worries how his own son might ever afford to buy a home in Sydney. He has written and submitted a White Paper  called, THE REAL HOME TRUTH: Why Unaffordable Housing for Young Australians Hurts Us All. It explains historically how we got to this situation in Australia and how we can turn things around.

Sources:

  1. Federal Government Budget website – www.budget.gov.au
  2. University reviews website –https://universityreviews.com.au/graduate-salaries/
  3. Demographia (2017), 13th Annual Demographia International Housing Affordability Survey:2017.
  4. Demographia (2017), 13th Annual Demographia International Housing Affordability Survey:2017.
  5. Demographia (2017), 13th Annual Demographia International Housing Affordability Survey:2017.
  6. Federal Government Budget website – www.budget.gov.au
  7. Demographia (2017), 13th Annual Demographia International Housing Affordability Survey:2017.

 

Robert Snell is an Authorised Representative and Life Values Pty Ltd is a Corporate Authorised Representative of Financial Services Partners Pty Ltd. ABN 15 089 512 587, AFSL 237 590.

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2018-02-23T17:38:13+00:00 May 10th, 2017|Own It|

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