Missed the Mark
With NSW and QLD about to embark on a new & updated First Home Owners Scheme, lets see who it really benefits?
This Blog is not about the new rules and regs (oh that would be so boring), it’s about how I think the government have got it all wrong and totally missed the mark.
For those who want to know about the new scheme (there’s that word again…scheme), here are the links:
http://www.osr.nsw.gov.au/benefits/first_home/
http://www.osr.qld.gov.au/home-page-promo/fhocg-state-budget.shtml
So let’s look at this practically, the grant only applies to new properties. This has been done to try and stimulate the building industry along with create new dwellings so we can house our growing population…
Now in theory this sounds great, except for one factor… you need land to build new properties on?
Wow, how did that tiny factor slip through the masterminds that run the states???
This tiny slip up is going to ruin the chances for the majority of first homeowners in Sydney and Brisbane ever buying a property. And it wouldn’t surprise me if the other states follow this in the coming years.
The key issue here is, the only affordable land in these cites are in the western suburbs. And unfortunately the vast majority of potential first home purchasers do not live near these suburbs, nor want to, but now for many, they will have to…
But let’s look at that… 225m2 blocks for $195,000 in Ropes Crossing, yes 225m2… meaning you could put a small three bedroom house on the block for a complete package of around $350,000. Given the average package is around the $450,000, how affordable is this for first home buyers?
Brisbane is a different story, if you wish to move into the outer suburbs, you can live in a comfortable 4 bedroom 2 bathroom double garage home for around $380,000.
Sure they could buy new units or townhouses and this will satisfy some first homeowners but why should we as consumers be dictated on what we buy to own as a home? Given the huge vacancies in units all through Sydney, Brisbane and Melbourne, are units the type of accommodation we should be focusing on? Jump on real estate.com and search under rent for units in these capital cities and you will see over 1200 units available for rent, per city…
And yes the Urban sprawl is what the great Australian dream has been made of for the last 25 years, but with many First home buyers now opting for lifestyle and travel over settling down in the early 20’s, it says a lot about how misaligned this new scheme is…
So who will this help?
The true winners of this scheme will be those who already live in the western suburbs and those who live in regional areas where land is close to where they want to live and is affordable, not to mention available? Live east of Parramatta in Sydney and try and find a vacant bl0ck of land…
Now, what good is a bash on the new homeowners scheme, if I couldn’t supply a solution?
Why not supply incentives for investors, so they can continue to invest, after all investors:
- Can afford to invest
- Are not restricted to investing in locations where they want to live
- Supply housing to potential tenants
- Often renovate properties, therefore stimulate the housing industry in many trades
- Often buy more than just one purchase in short periods of time
- Buy new properties that stimulate the new housing industry, just like what the government are trying to do with this scheme
- Keep our banking system very healthy by borrowing more money
- Are a larger portion of property purchasers than first home owners alone therefore potentially increasing the stimulation economy receives
- The incentives do not need to be as large to create a flurry of activity
Recent months have seen investor activity increase in many locations across Australia… Imagine what a reduction of Stamp Duty would do, even a 20% reduction would tip many investors over the edge to consider buying.
To add more value to this idea, the government could also have a secondary program where first home owners could invest in property initially and create some wealth through bricks and mortar and if they were to sell that property later on and use profits to then buy a home, they would also receive an incentive then to buy their home… a double bonus structure. Keeping them free from paying Capital Gains Tax within a certain timeframe would make this a very attractive option and not cost the government a lot of income.
I already buy investment properties for many clients who cannot afford to buy property where they live… the essentially take lifestyle and rent where they want to live over having a huge home loan/ noose around their neck.
This type of program would also help reduce the loan to value ratio debt levels we see with first home owners, generally at the 95% borrowing mark… many times at 100% plus when utilizing their parents home as equity.
It could be a win win scenario…
I would be very interested to hear anyone else’s ideas here… these are just a few I thought of over the weekend. Together we could run the country…