What does the 2017 budget mean for housing affordability?10 May 2017
One of the key issues heading into this year’s budget was how the Coalition government would address the issue of housing affordability.
For many young people, buying a house is quickly becoming impossible. House prices are constantly increasing and getting a job straight out of university that pays well enough to buy a house is hardly a certainty.
So, will this year’s budget help young people crack into the housing market? Well, possibly, but possibly not.
It’s confusing, I know. Here’s my attempt to explain the new housing affordability measures in the budget, and how they could help young people.
The Coalition government has created The First Home Super Savers Scheme. It’s a fancy name, but what does it mean?
Basically, the government is going to allow first home buyers to use a portion of their superannuation for a first home deposit.
There is a cap on the amount of superannuation you can use for your first home; $15,000 a year for a total of $30,000 over two years. This will also be taxed at a lower rate.
The government thinks this will help young people buy their first house. However, it does raise questions about the value of superannuation, which for a long time has been considered untouchable until your retirement.
This idea was floated earlier in the year, and was met with harsh criticism from Labor leader, Bill Shorten who described it as a “thoroughly bad idea”.
Foreign buyers and investors
The 2017 Budget has included some changes for non-Australians buying and selling houses in Australia, which could help free up the market a little.
Foreign investors will be charged for any properties they leave empty. The 2017 budget outlines that when a foreign-owned property is left empty for more than six months in a single year, the owner will be hit with a fee.
This measure seeks to ensure any investment properties foreign investors purchase, but do not plan to live in, will at least be rented out.
In addition, there will be a 50 per cent cap enforced on the amount of new developments that foreign investors can purchase.
Finally, foreign owners will have to pay capital gains tax when they choose to sell their main residence.
It is fair to say foreign investors and property owners have lost out at this year’s budget.
The Coalition government will put $375 million into crisis accommodation over the next few years. This will help the homeless and potentially victims of domestic violence who have nowhere to go.
There is another slightly confusing addition to housing affordability in the budget. Sellers who are over 65 and have lived in a home for at least 10 years can put up to $300,000 from the sale into their superannuation accounts. This initiative is again designed to free up the housing market for younger buyers.
The holy grail of housing affordability reform, negative gearing, isn’t really being touched by the government. No surprises there. However, the Coalition government has tightened the rules on what can be claimed under negative gearing, such as travel expenses.
So, will housing be more affordable?
The short answer is, well, probably not.
The Coalition government has refused to change negative gearing, while allowing young people to dig into their super is unlikely to drive house prices down.
Changing rules to superannuation simply gives young people another way to save up the funds for a house deposit. Political commentators cannot see this affecting house prices.
The changes to foreign investment could free up a convoluted housing market and allow younger Australians the opportunity to invest and buy their first house.
When it comes to driving down house prices, it seems the Coalition government is still searching for a solution that does not involve changing negative gearing. Whether the 2017 budget will decrease the cost of buying a house, we will have to wait and see.
Photo source: ABC