If the aim of federal government policies is to increase affordability without decreasing house prices, then there is only one solution – allowing potential purchasers access to all their savings, including superannuation.
Executive Director of the Australian Institute for Progress, Graham Young, said that none of the other “solutions” would make a significant difference in the short term.
“Abolishing negative gearing and capital gains arrangements are a tax grab masquerading as housing affordability. If you tax an industry more heavily there will be less of it and it will be more expensive to buy.
“On the other hand supply side issues will only be addressed over time. Real estate development is a process that takes years, and sometimes decades. There is no tap that can be turned on and off with precision.
“And more supply will lower prices.
“Encouraging older Australians to downsize is good policy, but that runs up against supply issues as well. Downsizing on its own won’t create a single dwelling.”
Mr Young said that the AIP’s analysis showed that the problem wasn’t affordability – it was the deposit gap.
“Mortgage repayments are no more difficult to make than they were 23 years ago and are similar to rent in a comparable property.
“But it takes anywhere up to two-thirds longer to save a deposit.
“House price rises are a logical result of financial factors: record low interest rates; and supply factors: surging household formation as a result of demographic change and record immigration changes, restrictive town planning laws and high taxes on land development.
“The surge in investors is not because they are tax advantaged versus owner-occupiers – owner-occupiers get their own very generous tax concessions – no capital gains tax, and the ability to use their own pre-tax labour to improve their properties.
“The surge is because the increase in the period required to save a deposit has kept potential first home buyers out of the market and renting for longer – more renters must mean more investors.”
Mr Young said it was true that if more people had access to a deposit, then there would be short-term upward pressure on house prices.
“Isn’t that the point? To have more buyers? We could cut house prices by decreasing the number of buyers, but that is the reverse of what the government and the opposition say they are trying to do.”
Mr Young also dismissed complaints from the superannuation industry that the policy would adversely impact retirement incomes.
“The superannuation industry is short-sighted and self-interested. We shouldn’t have a superannuation policy, but a retirement policy.
“Any retirement policy will accept that housing is the major asset required for a comfortable and dignified retirement.
“You can’t camp out in your share portfolio, so any retiree who doesn’t own a home outright will withdraw enough as a lump sum to buy or pay-off a home.
“Money invested in a house is just a retirement investment in a different vehicle to superannuation, it is not a raid on anyone’s superannuation, but a considered co-investment.”
For further information contact Graham Young 0411 104 801