This time next week, barring another hung parliament, the outcome of the Federal Election will be known. Whatever political party has its mitts on the reins, property should be a primary focus. After all, it is a major economic linchpin.
From time to time, governments around the country are reminded of the importance of the housing sector and roll out new initiatives in a bid to drive activity. We’ve had the first homebuyer grants, building boosts, stamp duty concessions and land release increases.
In the 2007 election, the idea of savings accounts for first-time property purchasers was floated with much gusto. Basically, young people could deposit their savings and have a certain amount matched by the government. It sounded great, but the take-up wasn’t great.
The National Rental Affordability Scheme (NRAS) is another program that aimed to tackle rent affordability issues in major centres. Basically, investors who signed up to the scheme bought newly-built properties that were to be rented below market value to low-income key workers.
It was sluggish when it kicked off and few investors were interested in $100,000 worth of cash and taxation incentives. But then it went nuts and property marketers cottoned on to the opportunities on offer. Some were offering good deals, others weren’t, but all in all it was a pretty successful scheme.
Perhaps the most well publicised adjustment of housing policy relates to successive state and territory governments scrapping or significantly scaling back their first homebuyer grants. Some replaced their cash handouts with programs designed to ignite activity in the construction sector, giving grants for buyers of newly built homes. Others left the gaping void wide open with no alternative.
Issues surrounding the benefit of the grant aside, most experts agree it had a detrimental impact on sentiment, buyer willingness and ability. In most states, first homebuyer numbers are at their lowest levels in years.
Polling tells us we’ll almost certainly have a new, Tony Abbott-led government when the dust has settled after Saturday. Here are a couple of ideas to support the vital property industry in the next term and beyond.
In the years following the GFC, buyer activity was very low. Jitters across world financial markets and in the banking sector, coupled with most lenders drastically tightening their lending criteria, saw most people delay the decision to buy a home to live in.
As a result, more people stayed renting a property. Throw into the mix a very flat construction sector and a growing population and you’ve got soaring demand from tenants. Vacancy rates are low and rents are rising in most capital cities. It’s placing pressure on people and no doubt eating away at their savings potential, which could see them locked off the property ladder for longer.
The NRAS scheme has worked in many ways. It has seen thousands of affordable rental properties built, and many of them are in locations people actually want to live. The government should look at ways of extending it. The incentives on offer are very good, but many mum and dad investors – for whom this sort of vehicle could be perfect – don’t know about it.
Promote the scheme, extend its reach, work with developers to roll out stock faster and get better at letting would-be tenants in target groups know it’s there.
Despite renewed confidence in the established housing markets of most cities, construction is yet to really come back. Melbourne boomed from 2010 but most of those projects are now coming to a close and loud talk of a potential oversupply saw new starts fall. Sydney is only just starting to come to life and Brisbane and Adelaide are pretty much dead.
For one, the next government should boost its support for infrastructure in the middle and outer suburbs of our capital cities where new housing estates are being built or planned to be built.
People wonder with concern why people aren’t buying these types of properties at the moment. I dare say the two-hour drive in peak hour to work is one reason. Plan and accelerate the construction of reliable transport or explore the viability of establishing employment hubs so it’s realistic for families to settle there.
The success of the Springfield region between Brisbane and Ipswich in Queensland’s southeast is a great case study. There are schools, shopping, employment facilities, a university, an improved motorway, bus services and a train line on the way. Many residents have everything they need on their doorstop. For those who want to head into the CBD, it’s not a major hassle.
On top of that, governments of all levels should work together to coordinate planning and land release strategies. More flexible planning should be encouraged in inner-city locations for infill development. You only need to see what’s happening with laneway housing in Melbourne – the clever and efficient renewal of land with access from a lane – to see the opportunities on offer.
I was part of an interesting debate with a couple of people on Twitter a few weeks ago. It was during one of the leaders’ forum debates on television and the topic of housing was briefly raised.
I responded to a few misconceptions that people tweeted out – housing has never been less affordable, for example. Well, it’s actually the most affordable it has been in some time. Another related to how little our parents and their parents had to fork out for a mortgage, even though the percentage of household income required to service the debt on a principal place of residence has barely changed in four or five decades.
There’s no denying that housing is expensive, but it’s not entirely unaffordable. However there are numerous barriers that first-time buyers face, and helping them jump the hurdles should be the focus.
Let first-time buyers access some of their superannuation savings for a deposit on a home. Not an investment property, but a house to live in. Cap the age up to which they can draw out, so there’s sufficient time to continue accumulating super. Put a limit on how much they can take out, so they’re not overextending themselves. And regulate the heck out of it, so if they rent it out a year later and rort the system, they’re penalised.
Alternatively, a government-backed deposit loan would be a good way to help. Recipients could use it to buy their first home and then pay it back at a low interest rate over a period of time. If they sell or rent out their home, it should be paid back.
For other buyers and again for those up to a certain age, consider the idea of allowing them to buy a home in a self-managed superannuation fund. One guy who tweeted me last week lamented that he’s got a decent retirement kitty but hasn’t built up enough of a deposit. Such a scheme, again heavily regulated, would help.
And across the board, it’s time to seriously discuss getting rid of stamp duty. It’s a big income earner for states, but at the cost of getting people into a home sooner. It should go.
What’s your big policy idea for supporting the housing sector?
Shannon Molloy is the deputy editor of Australian Property Investor magazine, www.apimagazine.com.au