Lead­ers in­flict un­civil war on the home front

The Weekend Australian - Review - - Primes­pace - TURI CON­DON PROP­ERTY ED­I­TOR

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.

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