We’ve heard recent reports of a certain politician suggesting buyers simply ‘earn more money’ if they want to get on the property ladder.
A housing affordability strategy targeting first time buyers is gaining some traction with MPs, offering a more viable potential solution.
A proposal to allow young people to access some of their superannuation savings if they make voluntary payments is being pushed within the Coalition, with the Federal Treasurer Scott Morrison developing a much-needed housing affordability strategy set to be announced in the May Federal Budget.
Under the plan, first time buyers would be able to access their employer superannuation contributions equal to their voluntary top-up payments, which could then be used as a deposit on a first home.
With housing affordability remaining one of the government’s most pressing issues, there is much ongoing debate about the best way to address the problem. Some senior government figures are understood to be cautious about the proposal, arguing that boosting home deposits could add inflationary pressure to an already heated market. Many industry pundits have also been voicing their concern about the plan.
With housing affordability remaining one of the government’s most pressing issues, there is much ongoing debate about the best way to address the problem.
Additionally, some MPs are encouraging Mr Morrison to allow older Australians to downsize their homes without it affecting the pension asset test, this in the hope that the ‘downsizers’ large family homes will become available in larger numbers to buyers and likely this increased volume on the market will slow price growth. This also being pushed by the industry’s peak lobby group, the Property Council.
With 10 weeks to go until the Budget, it remains to be seen what the Coalition will deliver in relation to the particularly hot topic.
Of course the real balancing act the Budget and RBA have to master is the quite massive variation in local economic conditions between states and territories and regions within each. To promote the same limits on buyers in Sydney & Melbourne and then drought-hit rural towns and mining-starved cities and towns would prove disastrous to those fraught economies.
To New Zealand property news, and there is some speculation that inflated property prices will ease over the next few years, according to economic forecaster Infometrics. They are predicting that house prices could fall 12% by 2020 due to a combination of rising interest rates, falling net migration and slowing population growth. That said, it was Infometrics who last year forecast an 11% drop in house prices in the two years to 2019 and this speculation may turn out to be more mild than they’re predicting…history suggests this is likely to be the case.
Infometrics and most bank economists are expecting the Reserve Bank to keep the official cash rate on hold until mid-2018, with the Reserve Bank itself forecasting a hike at the start of 2020.
Finance Minister Steven Joyce has also been warning about the potential for rising rates. Infometrics chief forecaster Gareth Kiernan said Auckland mortgage-holders look particularly vulnerable to even modest rate rises, with a future rise of 1.5-2 percentage points stretching many borrowers.
Like Australia, New Zealand has many regional centres suffering low growth driven by population outflows to larger cities and tougher times in rural sectors. What’s appropriate as a control mechanism against Auckland price growth is not appropriate to Greymouth, Dunedin or Gisborne markets, for example. Areas tied into the burgeoning tourist trails on the other hand, are flourishing, with associated businesses expanding rapidly as are the local economies.
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