Leaders inflict uncivil war on the home front
THE bidding war for the firsthome buyers — and their families’ — vote hit a new high this week. John Howard promised $ 1.6 billion in tax breaks on first- home buyer savings accounts four months after Kevin Rudd came out with his affordability package.
And Monday’s Coalition re- election launch saw a raft of other temptations — capital gains tax breaks for shared equity in a family member’s first home, 1000ha of commonwealth land to be released for development and infrastructure funding.
All of this is aimed at making homes more ‘‘ affordable’’.
And its all good to see, but the market has already spoken. Affordability is getting worse, not better. House prices rose 12 per cent in the year to September, according to researcher RP Data and Rismark.
Interest rates are on the rise, and don’t look like breaking the back of rising house prices.
Yes it should slow price growth down, but not stop it.
Investment bank JP Morgan says it would take four 0.25 per cent interest rate rises just to sop up the last round of tax breaks, let alone what’s on offer now from both parties.
As has been written about thoroughly in the past few weeks, all the political largesse will fuel the economy, and house prices.
So if you are thinking about buying your first home, do you jump in now or hope the politicians have got their housing affordability policies right? If you are a Gen X or Y who plans to buy in the inner city or affluent suburbs, jump now.
Prices in these areas shrugged off the last round of interest rate rises and will probably do so again.
Under the Prime Minister’s proposal, you can stash $ 10,000 a year away under the savings/ tax break plan. But the tax breaks are unlikely to keep up with prices of the houses you want.
Head to the more outlying suburbs and its a different story, particularly in Sydney, where house prices have gone backwards.
Here it makes sense to sit on your hands.
Lenders are a little more nervous after the sub- prime lending crisis in the US, house prices are still very soft and there is plenty of stock for sale.
Prices are bottoming, but certainly don’t look like lifting quickly and interest rate rises have a big impact.
The policies of both parties aim to release more land for new development, but as David Keir, head of one of the country’s biggest residential developers, Delfin Lend Lease, pointed out this week, many of the big master- planned communities are aimed more at the second, third and even fourth- home buyer.
Yes, anything that helps people get into an unaffordable housing market is great.
But both parties’ vote- buying is fuelling the economy — giving with one hand and taking away with the other.