Frydenberg summons more home buyer patsies

With demand from first home buyers (FHBs) beginning to wane, Treasurer Josh Frydenberg flagged over the weekend that Tuesday’s federal budget will contain a range of new subsidies to improve ‘housing affordability’ under a so-called “family home guarantee package”.

Under the changes reported in the Weekend Australian:

  • A government-guaranteed home loan scheme will be offered to more than 125,000 single parents, which will allow them to purchase a home with as little as 2%. “In Sydney, this would see single parents requiring a deposit of just $14,000 based on a property worth $700,000, down to just $5000 for a home in regional South Australia worth $250,000”.
  • Access to the first-home super saver scheme will be expanded from $30,000 to $50,000.
  • An extra 20,000 places will be offered under the existing first home loan deposit scheme, which allows people to acquire a mortgage with only a 5% deposit, with risk underwritten by taxpayers.

A senior government source told The Australian that the single parent subsidy schemes are “likely to be open-ended, with more places being offered over time depending on demand”.

Clearly, home buyer subsidies are now a permanent feature of the Coalition’s fake housing affordability policy.

Like all demand-side measures, these policies will add more fuel to the housing bonfire, pushing up dwelling values even further, and worsen actual affordability.

Anything to keep the ponzi scheme going.

Unconventional Economist
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Comments

    • Far better to cap the mortgage rate at current levels for the life of the loan for anyone who qualifies under current criteria if you want to do this for struggling home owners. Far too responsible?

      The deposit required on a giant mortgage without income to match was the inevitable hurdle to government and RBA on their housing debt ‘free lunch’. Expect more of this.

    • Strange EconomicsMEMBER

      And where do you get a 3 bedroom family place for less than 700k in Sydney or Melbourne? . Even if there is, As its only a single income say you can only borrow 7 times your income , and no deposit, the average single income is maybe 70K you are looking at a 500K 3 bedroom place. So even then 5% interest you pay 50% of your income for the mortgage. Then you might need a car for 10% of your income to drive in 40km to the city. Then you might like to use the remaining to budget for food, internet, children, school?

      So how can you do it – The boomer parents have to stump up. Otherwise not going to be popular.

      The problem is the complete lack of affordable housing for lower incomes. in the cities.

      But once you can hop on this, thats 70,000 a year tax free capital gain , government guaranteed forever, so who cares. Get the boomer parents will buy in for you and collect FHB bonuses on the way.

  1. Borrow 700000 with almost no money down would mean $2,550 a month in repayments + interest for 30 years at current rates (westpac mortgage calculator). Average weekly earnings for women in NSW are $1600 (ABS Nov 2020 latest) or around $83k p.a., although the median is signficantly lower. Surprisingly to me, this is doable. However, if interest rates rise to 4% an 83k earner would be spending 50% of the earnings (before tax) on their mortgage. I note that interest rates on mortgages in super are above 4% right now. I can’t see there being too many takers for this, if there were, the interest rates would have to stay very low for an awfully long time. But this is not about Australia. This about Sydney, Melbourne and Canberra. Mates looking after mates’ kids.

    • FUDINTHENUDMEMBER

      Lol mate nobody does a budget before buying a house any more. If a bank will give you the debt to secure the property, that’s all that matters! Very soon you will be rich regardless because of the eternal Boom Times ™.

      Step 1: Secure the debt
      Step 2:
      Step 3: Profit!!

    • happy valleyMEMBER

      “… the interest rates would have to stay very low for an awfully long time…”

      In the absence of external forces, interest rates will not rise this decade at least – Lowe’s gambit about “until at least 2024” is likely BS?

    • Jumping jack flash

      Of couse its doable, the debt is super cheap. The barrier to debt is the deposit. 5% of 700k is 35k. This is very difficult to save when you have kids, school, car, pets, other expenses, etc etc.

  2. MathiasMEMBER

    Yep. Keep house prices high while we split society and create divorce rates.

    Does that mean woman will be chasing men down to pay off there mortgages?

    Does that mean men can claim half the house? ha ha.

    • working class hamMEMBER

      It may help some legitimate women in trouble, maybe even a few men. But, this has the potential for truely horrifying rorting.

    • How to Rort this as single person, neglected uterus, single income, no divorce unearned bonanza & no boomer parents with property portfolio:) HELP:())))

  3. Display NameMEMBER

    With a deposit of 2%, the government is now the purchaser of last resort.

    • Jumping jack flash

      2% is still too much. A deposit should not be based on a percentage, the system will eventually stop working, and simple maths proves this.

      By 2050 when median house prices are around 10million, what will a 5% deposit look like?

      And if the government doesnt provide more subsidies, or a UBI, or gets a rocket under CPI to grow wages, nobody will be able to save up just the deposit in a single lifetime.

  4. Feydwncoal wants to reopen the immigration flood gates next year

    Paging albodross.

  5. BradleyMEMBER

    Summoning more patsies from here and abroad -https://www.smh.com.au/politics/federal/budget-plan-australia-to-open-borders-next-year-to-bring-back-migrants-20210509-p57qah.html#comments

    • That’s the big Budget story today, the “exclusive” by senior lapdog David Crowe, in Costello NineFax papers. Record levels of mass migration, the only thing that can save Treasury “GDP growth”, are definitely coming back, ready or not.

      What about COVID quarantine and vaccine, 35K stranded Australians, Australians who can’t travel, voters’ wishes, infrastructure, sky-high housing prices, the environment, and all the rest? Tell somebody who cares.

      Will the cutting-edge Albanese “Opposition” wave this through in their Budget Reply? Just you watch them

      • happy valleyMEMBER

        Yep, warm foreign bodies are needed to further turbocharge housing prices and wage slavery – a win-win for every LNPer.

      • Call me a traditionalist but to me an Australian is a citizen.

        On the weekend a few Articles across the MSM stated Australian residents in India are stuck and can’t come to Australia. Shouldn’t that just be Indians stuck in India?

        What are the actual caps to this scheme, are they high enough to purchase a house or a just dog kennels.

        Seems to me to be a gift to those trying to offload overpriced inner city units ..

  6. pfh007.comMEMBER

    Well what choice does he have?

    It is not as though anyone (other than a few money cranks) is talking about the sort of reform to our monetary system that would offer an alternative to the lunacy of QE, ZIRP, NIRP, TFF etc.

    End the banker monopoly of central bank deposit accounts NOW.

    Looks like the Economist is starting to get the message, though they tend to talk about the flashy CBDC rather than something simple and easy like a deposit account.

    https://www.economist.com/leaders/2021/05/08/the-digital-currencies-that-matter

    • Jumping jack flash

      THIS!

      Debt is essential to buy a house, just try buying one without using any. It is the least the government can do to make the necessary volumes of debt available to all. Anything less would be totally unfair.

      • pfh007.comMEMBER

        Yes, lending to home buyers secured by first mortgages is low risk and simple.

        The banks have no business being involved in that market.

        A bunch of not for profit credit unions attracting mom and pop investment funds and lending them to home buyers is all we need.

        And if the government wishes to reduce the cost of such loans further (or just loans specifically for new construction to achieve healthy vacancy rates in the rental market) it can advance funds to the credit unions at zero percent.

  7. Silly me. Imagine thinking, tomorrow’s budget, will be talk of,
    – a national high speed magnetic, electric rail network
    – nuclear reactor electricity stations, all over the place
    – heavy steal industrial primary, and secondary manufacturing
    – electric vehical recharging stations everywhere
    – ultra long life battery technological discoveries, and superfast charging
    – top class, world envy medical system
    – a don’t fck with us military
    – banks that actually pay interest on saving accounts
    – space program, with an Australian space station, and exclusive Australian territorial moon region

    What are we going to get?
    – Wanna a property with your restuarant, or coffee shop job? We will subsidise your salary and property purchase

    You may say I’m a dreamer, I think I’m the only one…I hope some day you’ll … Ah forget it!

  8. Jumping jack flash

    “Clearly, home buyer subsidies are now a permanent feature of the Coalition’s fake housing affordability policy.”

    As they should be and need to be.
    Home “ownership” is still one of those things that is touted as the Australian way of life. And this is not just in Australia either! The same catchphrase exists in any developed economy.

    The path to home ownership is colossal piles of debt. Plain and simple. The barrier to debt is most often not the repayments because debt is super cheap and has been for a long time. The barrier to the required amounts of debt is the deposit which is still absurdly a minimum of 5% of the pile of debt you need!
    NZ knew what was going on and wisely lowered this to 2%. Even that is too much, in fact any deposit that is a based on a percentage is no good, and simple maths proves this.

    Offering subsidies for obtaining debt is the very least the government can do to assist potential home buyers who have been locked out from obtaining the debt they need by antiquated policy.

    And after that the government can continue to have a think about how they’re going to raise CPI off the floor so wages can rise and actually expand the economy’s debt capacity.

    • Jumping jack flash

      He missed the boat with regards to setting off the economic engine of:CPI plus stimulus equals wage rises, equals more debt, equals economic growth.

      He may as well plod down the well-worn path back to 2019 because he doesn’t have any other ideas, and is seemingly incapable of thinking.

  9. Clearly, home buyer subsidies are now a permanent feature of the Coalition’s fake housing affordability policy.

    It’s what most young Aussies want, it’s hard to understand but trust me it is true.
    Property ownership is the only pathway to wealth that they’ve ever seen to function. Property ownership is a magical thing, it is far more important than career or education or hard work or any of the more traditional ways that people got ahead. In Australia getting ahead means owning property. Owning real estate is a virtue and renting is most definitely a vice and that’s all that anyone really needs to know.
    Personally if I were young I’d take the plunge and signup on the doted line regardless of the price. I’d do so for the simple reason that this pathway delivers the security necessary to start a family and get on with your life.
    If it all went pear shaped, I’d simply F-off to another country with some skills that I somehow acquired, I wouldn’t for one second consider that I had a moral obligation to repay these loans. These loans aren’t actually someone’s savings, they’re just funny money. My moral compass says the banks created this mess and the banks can fix this mess.
    For me personally, what’s the worst that can happen? I will be bankrupted and forced to raise a family in sub standard rental accommodation (sounds like life at the moment for renters and many have been stuck in an endless holding pattern for more than the duration of a bankruptcy and for what possible gain?

  10. Forrest GumpMEMBER

    If the Morriscum government was fair dinkum about genuine housing affordability they would remove the demand out of the system by canning specufestor demand.
    -Quarantine Negative Gearing losses against the same income generated from the rental of the property (NOT against other income)
    -Make Capital Gains Tax payable annually rather than allowing the investor to game the system, move into the property prior to the sale so that it becomes owner occupied and thus removing the requirement to pay capital gains.
    -Remove depreciation allowance of houses & associated assets over 20 years old. Its total bullshit that you have a house thats worth $1 million and its 30 years old that is still be depreciated. Utter complete fantasy and a total bullshit tax dodge

    its obvious that the govt is not only in bed with developers and the housing industry, more aptly, the housing industry has its member(s) shoved right up the klakker of the the LNP.

    If anything was a sure thing: its not Crypto. Its Australian housing under a LNP govt.

    • kannigetMEMBER

      Negative gearing by itself isn’t that much of a problem, its when you stack it up with the CGT discount that it becomes really worthwhile as a strategy. The CGT discount is the issue here, and I like the idea of a annual CGT bill, with it linked to change in median price for your area and not your “assessed” value.

      One thing though, When you move back in to your Rental to turn it into a PPOR, that’s a CGT calculation event. That particular loophole was closed a number of years back according to my accountant.

      • working class hamMEMBER

        Check out the six year rule, if it was once your PPOR, then you can legally move out for less than six years, as long as you don’t claim any other property as your PPOR in that time and off load it CGT free. Technically, you could then offload this property, then transfer another property you currently live in, into your PPOR, rinse and repeat. You never have to pay CGT if you never claim PPOR on more than two properties for more than 6 months. Considering it only takes 6 months to determine it’s your PPOR for tax and loan purposes, that’s a B double sized loophole for any savvy investor.

        https://duotax.com.au/capital-gains-tax-property-6-year-rule/

        • kannigetMEMBER

          Thats a very generous assessment of the 6 month rule and based on the examples on the ATO website I would be reluctant to try and make the claims that site made. Considering the penalty for avoidance is Amount avoided + 200% of amount you would likely end up giving them the whole gain and some if they audited you. Remember they are the sole arbiters of how these definitions are applied….and if it did end up in court there are examples they have given that back up their position..

          ATO information

          • working class hamMEMBER

            The grey areas involved in ATO wording is not an accident.

            “Generally, you:
            can treat the dwelling as your main residence for:
            up to six years if it is used to produce income
            indefinitely if it is not used to produce income
            can’t treat any other dwelling as your main residence for that period (except for a limited time if you’re moving house).”

        • drsmithyMEMBER

          Considering it only takes 6 months to determine it’s your PPOR for tax and loan purposes, that’s a B double sized loophole for any savvy investor.

          The savvy investor never sells, they HODL and use the increase in value to leverage into another property.

          Only loosers with tiny incomes who are buying houses for the quaint idea of living in, need to sell.

          As Reusa if you don’t believe me.

  11. kierans777MEMBER

    Clearly, home buyer subsidies are now a permanent feature of the Coalition’s fake housing affordability policy.

    Why lay this all at Frydenliar’s feet? This brain fart is most likely from his Assistant the Minister for Hopelessness #shadysukkar. Sukkar is like teflon. No matter what happens he never gets scrutinised when he’s the “faceless man” in the back.

    • This scraping the barrel policy will have been sugested by Treasury as they’re starting to exhaust the supply of first time home buyers.

      The likes of Frydenburg are just empty suits who get wheeled out to read a script for the cameras.

      • Jumping jack flash

        There’s still a ton of pent-up demand. The super release proved that beyond a doubt. The barrier is the deposit, not the cheap debt.

        Like any good ponzi, there needs to be a steady supply of greater fools at the bottom, eligible to take on the truly gargantuan piles of debt that are required to pay the returns of those already climbing the pyramid. This will do nicely.

      • Jumping jack flash

        Nah, there’s no risk while everyone pretends there isn’t.
        LVR is golden. Houses are worth whatever we say they are, and the debt is attached to them.

        No other risk is considered, and it is simply ignored even if there is any.