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The politics of housing

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stui magpie Gemini

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PostPosted: Mon May 16, 2022 6:31 pm
Post subject: The politics of housingReply with quote

<split from election thread>

Anyone got any thoughts on the 2 main parties home buyer policies?

I lean toward the Lib/Nat one.

Labors policy as I understand it is to give 10,000 eligible people each year money to go toward a house, up to 40% of the value (capped) which means the Government owns 40% of your house and if/when you sell it you have to repay that plus any capital gain.

Lib/nat Policy seems to be to let anyone who is a first home buyer access up to 40% or $50k of their super, whichever is less, to go toward a deposit. If you sell it, what you withdrew goes back into Super. That's supplemented with encourage eligible downsizers to put money from the sale of their home into super.

For me that seems a better approach. Who wants to rent all their life knowing that the super building up for their retirement is being outstripped by housing prices. Provided you're sensible and buy with mortgage repayments around what you'd be paying anyway in rent, you take an early hit to your Super but end up with the best of both worlds. A house AND super.

I don't understand how that would lead to the claimed housing price increase, the people who it would benefit can't buy anything at the moment as they can't save a deposit while paying rent. $50k would make up 10% deposit on a $500k house, if you access this scheme you're likely not buying in Toorak.

Disclaimer, I'm not an economist

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eddiesmith Taurus

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PostPosted: Mon May 16, 2022 7:03 pm
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stui magpie wrote:
Anyone got any thoughts on the 2 main parties home buyer policies?

I lean toward the Lib/Nat one.

Labors policy as I understand it is to give 10,000 eligible people each year money to go toward a house, up to 40% of the value (capped) which means the Government owns 40% of your house and if/when you sell it you have to repay that plus any capital gain.

Lib/nat Policy seems to be to let anyone who is a first home buyer access up to 40% or $50k of their super, whichever is less, to go toward a deposit. If you sell it, what you withdrew goes back into Super. That's supplemented with encourage eligible downsizers to put money from the sale of their home into super.

For me that seems a better approach. Who wants to rent all their life knowing that the super building up for their retirement is being outstripped by housing prices. Provided you're sensible and buy with mortgage repayments around what you'd be paying anyway in rent, you take an early hit to your Super but end up with the best of both worlds. A house AND super.

I don't understand how that would lead to the claimed housing price increase, the people who it would benefit can't buy anything at the moment as they can't save a deposit while paying rent. $50k would make up 10% deposit on a $500k house, if you access this scheme you're likely not buying in Toorak.

Disclaimer, I'm not an economist


Definitely prefer the Lib housing policy, along with the 5% deposit they already have. The deposit is the biggest hurdle for me at least and I'm sure many others. Most people I know who've managed to save for a deposit these days have done so by working full time and living at home for a few years.

To me the ALP policy would just massive inflate prices if you can now buy a house 40% more expensive than you can afford, a 40% you then have to pay back. The Victorian government has the same policy in place at the moment in Victoria.
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stui magpie Gemini

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PostPosted: Mon May 16, 2022 8:02 pm
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I don't see the ALP policy inflating house prices really, it's too restricted.

10,000 cases per year
Means tested
Price limit on the house you can buy.

It's not a bad policy, I just think the Lib/Nat one is better. Plus, if you're going to buy a house you already have to go into "partnership" with a Bank, do you really want to be the minority stakeholder in your home to the bank And the Government?

Using your super means it's your money and it's just you and the bank, any sale the money goes back to your super benefiting you.

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David Libra

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PostPosted: Mon May 16, 2022 10:27 pm
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stui magpie wrote:
Anyone got any thoughts on the 2 main parties home buyer policies?

I lean toward the Lib/Nat one.

Labors policy as I understand it is to give 10,000 eligible people each year money to go toward a house, up to 40% of the value (capped) which means the Government owns 40% of your house and if/when you sell it you have to repay that plus any capital gain.

Lib/nat Policy seems to be to let anyone who is a first home buyer access up to 40% or $50k of their super, whichever is less, to go toward a deposit. If you sell it, what you withdrew goes back into Super. That's supplemented with encourage eligible downsizers to put money from the sale of their home into super.

For me that seems a better approach. Who wants to rent all their life knowing that the super building up for their retirement is being outstripped by housing prices. Provided you're sensible and buy with mortgage repayments around what you'd be paying anyway in rent, you take an early hit to your Super but end up with the best of both worlds. A house AND super.

I don't understand how that would lead to the claimed housing price increase, the people who it would benefit can't buy anything at the moment as they can't save a deposit while paying rent. $50k would make up 10% deposit on a $500k house, if you access this scheme you're likely not buying in Toorak.

Disclaimer, I'm not an economist


Both sound crap to me, with the Liberal one being particularly bad for encouraging people to spend almost half their retirement savings. Neither are addressing the central problems in the housing market, which is that buying multiple properties is heavily incentivised through tax breaks, and thus strangling supply for people who want to own their own house. Until we address that, house prices will continue to skyrocket (as they’re doing regardless of this new policy), and that 40% chop-out will become increasingly devalued. It’s a superficial solution that will help some people in the short term but mostly just kick the can down the road until the next policy like this needs to be brought in in six years’ time to address the exact same problem.

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stui magpie Gemini

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PostPosted: Tue May 17, 2022 7:31 am
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^

2 quick points

1. With interest rates so low for so long, there's no tax break through negative gearing

2. Supply is there, new houses and estates are being built all the time, just not where you live. You can buy a new 3 bed home in Mernda for $550k, similar in other estates around the north-west fringe.

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David Libra

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PostPosted: Tue May 17, 2022 1:18 pm
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I take it as a given that houses in the country and outer suburbs are always going to be cheaper than the inner-city (and it's not hard to understand why being so far from the CBD is undesirable for a lot of people). Regardless, $550,000 is still maybe ten times what a house in the same place would have gone for thirty years ago, or around four to five times as much accounting for inflation " people certainly aren't earning ten times as much as they were then.

It's honestly ridiculous that this problem that negatively affects everybody under the age of, say, 50 (with the exception of the landlord class) and is a clear economic problem can't be at least partially politically addressed in some substantial way. I understand that the Libs' core constituency is people who benefit from rising house prices and that they therefore have little motivation to do anything about it, but Labor really have put up the white flag on the issue.

https://www.crikey.com.au/2022/05/16/when-will-politicians-accept-the-evidence-on-housing-policy/

Quote:
There is no annual cap on the number of people who can take [the government's superannuation offer] up " unlike the government’s deposit guarantee schemes, or Labor’s “shared equity” scheme announced during the election campaign. Nor are there any limits on the income of applicants, or on the value of the property purchased using the scheme. The only constraining factor is likely to be: how many aspiring first home buyers have that much money in their super?

This scheme will be warmly welcomed (as I have no doubt it is intended to be) by the 11 million or so voters who already own at least one residential property, and especially by the 2 million or so voters who own two or more properties. It may be welcomed by the much smaller number of would-be first home buyers who have the capacity to take advantage of it, although you’d want to ask, how many of them actually are there " and if a young would-be homebuyer has been paid so much that they have been able to accumulate that much super, why do they need to draw it down in order to buy a first home?

But it will be greeted with despair, I suspect, by the majority of the typically 100,000 people a year who succeed in becoming first-time buyers " and the presumably larger number who would like to but have been unable to become first-time buyers.

And it will be greeted with similar despair by those who, like me, have spent years wishing that politicians would actually learn something from the evidence of the past six decades.

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stui magpie Gemini

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PostPosted: Tue May 17, 2022 4:45 pm
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David wrote:
I take it as a given that houses in the country and outer suburbs are always going to be cheaper than the inner-city (and it's not hard to understand why being so far from the CBD is undesirable for a lot of people). Regardless, $550,000 is still maybe ten times what a house in the same place would have gone for thirty years ago, or around four to five times as much accounting for inflation " people certainly aren't earning ten times as much as they were then.


It may be undesirable, but it's a case of priorities. Do you (not you personally) want to be close to the CBD or be able to buy a house, because unless you're on a bloody good wage you can't have both.

I lived in Hawthorn and Camberwell when I first moved to Melbourne, 15 minutes to the CBD. When I got married in the late 80's, we moved to Watsonia as I got offered a cheap rental. 45 minutes each way extra commute but more money in the pocket.

We bought that house a couple of years later for $100k. I would never have been able to afford to buy a house in Hawthorn or Camberwell even back then.

Still here, same house, now it's worth around $1.1-1.3M

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roar 



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PostPosted: Tue May 17, 2022 6:33 pm
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Both are shit policies that won't achieve anything but the politicians already know that and are just trying to look as if they are doing something meaningful.
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What'sinaname Libra



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PostPosted: Tue May 17, 2022 6:35 pm
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David wrote:


It's honestly ridiculous that this problem that negatively affects everybody under the age of, say, 50 (with the exception of the landlord class) and is a clear economic problem can't be at least partially politically addressed in some substantial way. I understand that the Libs' core constituency is people who benefit from rising house prices and that they therefore have little motivation to do anything about it, but Labor really have put up the white flag on the issue.


How exactly?

Do you want the Government to interfere to cause housing prices to plummet to make them more affordable? How do you compensate those affected, and those who default as the asset value falls below the loan?

Does the Government increase stock - allow high density development across inner Melbourne, sell off parks and gardens to developers? Do you really want to change the streetscape of inner Melbourne?
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stui magpie Gemini

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PostPosted: Tue May 17, 2022 6:48 pm
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^

Stock is already increasing, it's just not bringing prices down.

Where I am, the blocks are pretty big and for years now so many people just subdivide, sell off the backyard and get a second home on the block or developers buy the unkempt deceased estate 50's weatherboards, bulldoze them and put up 3 townhouses.

If you can't buy a house where you want to live you have 3 practical choices.

1. Keep renting
2. Move/buy somewhere cheaper
3. Get a better paying job

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David Libra

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PostPosted: Tue May 17, 2022 8:28 pm
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What'sinaname wrote:
David wrote:


It's honestly ridiculous that this problem that negatively affects everybody under the age of, say, 50 (with the exception of the landlord class) and is a clear economic problem can't be at least partially politically addressed in some substantial way. I understand that the Libs' core constituency is people who benefit from rising house prices and that they therefore have little motivation to do anything about it, but Labor really have put up the white flag on the issue.


How exactly?

Do you want the Government to interfere to cause housing prices to plummet to make them more affordable? How do you compensate those affected, and those who default as the asset value falls below the loan?

Does the Government increase stock - allow high density development across inner Melbourne, sell off parks and gardens to developers? Do you really want to change the streetscape of inner Melbourne?


I'm generally fine with inner-city high and medium development, particularly if it's affordable housing that opens things up for less wealthy renters and prospective buyers, new migrants, etc. Better than sticking towers in the outer suburbs, that's for sure.

On the first, I don't think.a temporary dip in house prices would be a bad thing (particularly if it sees foreign investors and other property moguls clear out and decide the grass is greener somewhere else), but surely the goal should be to at least stabilise prices (aligned with inflation) or slow the increase. There are economists who reckon we're in a housing bubble that will crash at some point anyway if this trajectory continues, so if government intervention can curb that then it might well end up having the opposite effect to what you're suggesting.

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stui magpie Gemini

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PostPosted: Tue May 17, 2022 8:48 pm
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We've been in a housing bubble for 10-15 years.

Prices aren't going to collapse unless interest rates go through the roof 80's style and people start defaulting on their mortgages.

Otherwise, best case scenario for prospective buyers is that prices stabilise rather than keep increasing.

On the foreign investors, ban them from buying. Simple. If you don't have rights to live and work here, you don't get to buy residential property.

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David Libra

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PostPosted: Tue May 17, 2022 8:50 pm
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stui magpie wrote:
David wrote:
I take it as a given that houses in the country and outer suburbs are always going to be cheaper than the inner-city (and it's not hard to understand why being so far from the CBD is undesirable for a lot of people). Regardless, $550,000 is still maybe ten times what a house in the same place would have gone for thirty years ago, or around four to five times as much accounting for inflation " people certainly aren't earning ten times as much as they were then.


It may be undesirable, but it's a case of priorities. Do you (not you personally) want to be close to the CBD or be able to buy a house, because unless you're on a bloody good wage you can't have both.

I lived in Hawthorn and Camberwell when I first moved to Melbourne, 15 minutes to the CBD. When I got married in the late 80's, we moved to Watsonia as I got offered a cheap rental. 45 minutes each way extra commute but more money in the pocket.

We bought that house a couple of years later for $100k. I would never have been able to afford to buy a house in Hawthorn or Camberwell even back then.

Still here, same house, now it's worth around $1.1-1.3M


That increase sounds about right " we're talking roughly 35 years, right?

For anyone who's interested, you can see how that stacks up against inflation here ($100 in 1987 would buy you $257 today, for instance): https://www.rba.gov.au/calculator/annualDecimal.html

So the house you could afford in Watsonia then would be worth around $250,000 of today's money, whereas the house you refer to in Mernda (another 20km further out) is more than double that. So it stands to reason that you, and maybe a lot of people who bought houses then, wouldn't be able to afford something now " even if they were happy to head to the outer suburbs. That's a problem, isn't it?

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stui magpie Gemini

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PostPosted: Tue May 17, 2022 9:15 pm
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I'm not sure if it's a problem, it is what it is.

In 1984 I could have a night out for $20. $5 fuel in the car,(40km round trip) $1.20 for a packet of smokes, $1 a pot, $6 for a decent dinner. Not sure how that plugs into the calculator but the same packet of smokes is now $50.

Hypothetical, if property investors were suddenly banned, would that have a real impact on housing prices or would it just mean that there were suddenly no rental properties and a lot more homeless people?

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David Libra

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PostPosted: Wed May 18, 2022 12:17 am
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Cigarettes have been taxed like crazy since the 1980s, so not sure if that's the best comparison! Some of the other items do seem to have gone up in price more than the inflation calculator would suggest (what's a pot now, $5+?), but I guess it should still be a relatively accurate estimate of such things.

What I'd be interested to see is how wages have changed (for a standard job like, say, working in a supermarket). My guess is that they might have actually gone down when adjusted for inflation.

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Last edited by David on Wed May 18, 2022 9:33 am; edited 1 time in total
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