tom

Creative Policies to "save" us from a House Price Crash

54 posts in this topic

I thought it would be interesting to throw a few housing policy ideas around knowing that it is likely in the coming months the government is going to be scratching for some. It would be good if we actually thought up some of the deliberate policies aimed at fueling house price rises before they do so we know just how cynical to be when they are announced.

Ones they have used already some are oldies and any of these could be redoubled or geared up:

First Home Owners Grant Boost.

Buying RMBS to shore up "competition" amoung lenders. I see this more as competition with my deposits just when they start getting a good return.

Mortgage holiday policy.

Negative gearing policy.

Halving the capital gains tax rate so that assets which appreciate are worth more as investments than assets which you can derive income from.

The more controversial ones which I might be alone in thinking:

GST

Developer Levies

Land use regulation and release

So while all of the above are in place we appear to have exhausted the markets ability to fuel itself onward and upward. So what is an Australian government to do?

I can think of a few new ideas:

A redoubling of capital gains tax if you sell within a certain period of time to prevent an investor panic sale / rush. i.e. if you sell before 2014 you pay the old rate of cgt after you go back to the old rate. This might be difficult due to retrospectivity but I will leave it here just in case.

A variation on the first pissble policy above and probably more likely A halving of cgt yet again from current levels if you hold residential property through to 2014 or some other date in the future.

Water down the waiting component of the FHSS even further and just allow it to be used for as long as you like and be put toward a mortgage rather than the current scenario that you can buy the house and have it thrown at the mortgage the year or two later.

First Home Buyers allowed to negative gear a portion of their first home. This was a Chris Joye idea from years ago and I must admit if they brought this in I would buy. Be mad not to as you get an effective 40% discount on your repayments, nonetheless to be clear I think it is stupid policy but if desperate could they?

I am sure their are lots of other creative ideas? I think it would expose the sham of any future affordability measure if it is first identified as a house price prop policy!

Share this post


Link to post
Share on other sites

Just thought of another one rather like rent assistance they might bring in home buyers assistance to those who have lost their jobs or earn beloiw a certain level and have to make it in the private housing game with their mortgage. The gov might even argue this should be higher than rent assistance because generally mortgages are higher than rents and so why wasn't it done earlier.

This might be a last ditch attempt to try to push back on foreclosures.

Share this post


Link to post
Share on other sites

They'll do nothing. My reasons are that the world has learnt it's lesson from the GFC, high asset prices can cause grief and bring down an economy, they'll be happy with stagnation over a long period although I hope for a crash of sorts for my own agenda. Too many economists worldwide are pointing their finger at Aus house prices and to inflate it more would cause a run on our banks from hedge funds and such and perhaps overseas funding borrowings will spike even higher if we're perceived as a risk from a even more inflated housing bubble. All our eggs are in one basket here, it's dangerous to push prices higher IMO and even Glenn Stevens has warned about house prices.

Remember how after the FHOG pushed up prices and caused more unaffordability? Tanya Pilbersek wasn't even asked any questions on Q&A and other media outlets because it was bloody embarassing, the Govt screwed up big time and they know it. Remember the Govt still have the fallout to come from all those FHB who bought at 40 year low rates @ 3% with rates edging up now. Some bloke on the ABC24 news was saying look at another 2-3% rise in the next 2 years, that would bring a $300K mortgage repayment to around $600+ a week, that's a lot of money for what I presume is a basic small starter home on the outskirts with a small deposit. There is no way the Govt will entice more buyers into the market now, you only have to read the sentiment and comments on news websites to realise people are getting wise and educated to these scams.

They'll let the market do what the market has to do on it's own accord. I'll expect more media pushing for the small block living, 300sqm release blocks will become the norm.

Share this post


Link to post
Share on other sites

An unscheduled rise in the legislated minimum wage will have flow through effects to all other wage earners, put support under the lowest tranche of property and keep the pyramid from tumbling down.

Edited by sydney3000

Share this post


Link to post
Share on other sites

An unscheduled rise in the legislated minimum wage will have flow through effects to all other wage earners, put support under the lowest tranche of property and keep the pyramid from tumbling down.

If so small biz will hit the wall and UE will rise.

Share this post


Link to post
Share on other sites

Zirp >> QE >> Govt buying toxic mortgages >> 2020 prices at 1980 levels as the banks won't be able to scrape together 5 pesos loaned from a Central American despot to onwards loan to you.

Share this post


Link to post
Share on other sites

I am not sure that our government has heeded the words of Kenny Rogers. While I agree the effects of stimulous will become more diluted the more they pump demand over time and the more people who are already in debt as opposed to those being welcomed onto the team, I don't think they know when to fold em so to speak and are in my opinion preparing for a double or nothing policy moment in the next 2 months.

Share this post


Link to post
Share on other sites

Instead of the F-HOG, the government could introduce the F-PIG. First Property Investor Grant. Just for those who have plenty of collateral in their own homes, but have never owned an investment property. Additional conditions is that it must be rented out 18 months over the next two years.

Then the rental market would flood, rental prices would plummet, and consequently a sizeable increase in foreclosures would follow. The more the government inflates property prices, the more drastic the consequences.

Share this post


Link to post
Share on other sites

not saying it's a good idea but:

hecs style loan for fho's

access to super

accelerated depreciation for investors

Share this post


Link to post
Share on other sites

not saying it's a good idea but:

hecs style loan for fho's

access to super

accelerated depreciation for investors

I reckon "access to super" stands out as one that could be argued for easily enough. Not a great idea for mine but I reckon I could argue it.

Share this post


Link to post
Share on other sites

They'll do nothing. My reasons are that the world has learnt it's lesson from the GFC, high asset prices can cause grief and bring down an economy, they'll be happy with stagnation over a long period although I hope for a crash of sorts for my own agenda. Too many economists worldwide are pointing their finger at Aus house prices and to inflate it more would cause a run on our banks from hedge funds and such and perhaps overseas funding borrowings will spike even higher if we're perceived as a risk from a even more inflated housing bubble. All our eggs are in one basket here, it's dangerous to push prices higher IMO and even Glenn Stevens has warned about house prices.

Remember how after the FHOG pushed up prices and caused more unaffordability? Tanya Pilbersek wasn't even asked any questions on Q&A and other media outlets because it was bloody embarassing, the Govt screwed up big time and they know it. Remember the Govt still have the fallout to come from all those FHB who bought at 40 year low rates @ 3% with rates edging up now. Some bloke on the ABC24 news was saying look at another 2-3% rise in the next 2 years, that would bring a $300K mortgage repayment to around $600+ a week, that's a lot of money for what I presume is a basic small starter home on the outskirts with a small deposit. There is no way the Govt will entice more buyers into the market now, you only have to read the sentiment and comments on news websites to realise people are getting wise and educated to these scams.

They'll let the market do what the market has to do on it's own accord. I'll expect more media pushing for the small block living, 300sqm release blocks will become the norm.

I like your answer Chim.

I think that's a very reflective and considered response.

Whether Govt's are so wise, time will tell. When their constituents are complaining about losing asset values, and more people begin losing their properties due to foreclosure, they will try something, I think. Exactly what, I don't know. Depends upon the amount of pressure that is placed to bear on the politicians.

They could actually subsidise FHB's in some way, trying to curb the slide down, with a tax rebate or something, for interest paid. I don't truly know, only pure speculation, but they're bound to try.

Share this post


Link to post
Share on other sites

There's no point messing with CGT for investors because most fiddle it by claiming use as PPOR at some point before selling.

The most obvious source of future bubble funds is super, surely... whether it be young-uns access to super for deposits or boomers self-managed funds permitted to go 'all in'.

In addition to more MBS purchases and further bank guarantees of course. Hell maybe they should just buy Sunorp and be done with it.

Makes my blood boil :furious: because at some point I'd like to return to Oz to live. In a house.

That I can afford to have a mortgage on.

That isn't in outer west bum f*ck AKA Melton

...on the bright side I'll be holidaying regularly in Europe for some time yet.... :thumbup: (so long as I still have work!)

Share this post


Link to post
Share on other sites

I reckon "access to super" stands out as one that could be argued for easily enough. Not a great idea for mine but I reckon I could argue it.

Yeah, I think access to that huge pot of super money is the one as well. You can already do it for investment properties via self managed super, even for your own business, so it wouldn't be a huge leap to allow FHBs to access at least a portion of their super for a deposit.

I think it's politically a much easier sell, as you are giving people access to their own money, so it doesn't impact on the budget (immediately).

Share this post


Link to post
Share on other sites

Yeah, I think access to that huge pot of super money is the one as well. You can already do it for investment properties via self managed super, even for your own business, so it wouldn't be a huge leap to allow FHBs to access at least a portion of their super for a deposit.

I think it's politically a much easier sell, as you are giving people access to their own money, so it doesn't impact on the budget (immediately).

And you are letting people save more in super! By buying a house they don't waste all that money in rent.

(an argument I disagree with but I can see it being used and believed)

Share this post


Link to post
Share on other sites

In addition to more MBS purchases and further bank guarantees of course. Hell maybe they should just buy Sunorp and be done with it.

Swan said in response to Combanks 0.45 raise he would be doing something in the next month and I would say this will be it, provide so much "liquidity" that the banks will have little choice but to loan it out and make bucket loads of dollars out of it. There is actually a difference between liquidity and the new price of credit. People want a higher return to invest in Australian banks as depositors, this ain't liquidity issues this is a repricing of credit.

He will say it is in the interests of competition but really the issue is less appetite for depositors / bond buyers to deposit into Australian banks / non banks so the government directly investing.

Share this post


Link to post
Share on other sites

Yeah, I think access to that huge pot of super money is the one as well. You can already do it for investment properties via self managed super, even for your own business, so it wouldn't be a huge leap to allow FHBs to access at least a portion of their super for a deposit.

I think it's politically a much easier sell, as you are giving people access to their own money, so it doesn't impact on the budget (immediately).

Being honest with myself, if they allowed people to do this I am afraid it would be another one that would tip me into buying. This would put the doom off for another few years but ensure that Australia has the lowest saving rate in the world. We would then have really put it all on the house!

Share this post


Link to post
Share on other sites

And you are letting people save more in super! By buying a house they don't waste all that money in rent.

(an argument I disagree with but I can see it being used and believed)

It's too easy - 'What better place to invest your super than the security of your own home', or 'the govt has decided to assist young Australians secure their future, by allowing them to utilise their superannuation savings to purchase the safety of bricks and mortar', and so on.

Being honest with myself, if they allowed people to do this I am afraid it would be another one that would tip me into buying. This would put the doom off for another few years but ensure that Australia has the lowest saving rate in the world. We would then have really put it all on the house!

I think I'll go beyond just buying, I think I'd be getting into buying existing properties and subdividing them. Even with stagnant prices I think there's money to be made in that.

Share this post


Link to post
Share on other sites

I think I'll go beyond just buying, I think I'd be getting into buying existing properties and subdividing them. Even with stagnant prices I think there's money to be made in that.

I will start securing more and more of my funds offshore in that event. I would expect to see wages go up and the same with the dollar.

Share this post


Link to post
Share on other sites

I think I'll go beyond just buying, I think I'd be getting into buying existing properties and subdividing them. Even with stagnant prices I think there's money to be made in that.

Well when you think of the effect 7k more of government money had on our house prices imagine if first home buyers could throw there super at the house. I am afraid we would not have stagnant house prices.

Don't get me wrong Australia has an unsustainable level of house prices but governments do have the power to channel funds into certain assets through either taxation and subsidies.

The sleeper issue in allowing this would be that you then effectively get to do one better than negative gearing you get to put money directly pay off a mortgage at a 15% rate of tax. I have never put more than the minimum into my super but now I am thinking this could be a mistake!

Absolute bonus if it only applies to new buyers homes become affordable but only because you can buy them pre tax! Its like a 25% discount, who needs a 25% crash when you can get a 25% discount on the house through tax treatment. It really is ludicrous near retirees get to do this now, but I don't know if the government could afford gen x and y also avoiding there income tax treatment.

Anyway I am certainly not saying I am for such a scheme it would be yet another wealth effect for future debt effect trade off, i.e. short term GDP boost for a long term drag effect but who knows what is around the corner from the wankers in government and if an incentive like this was offered I would become a bit of a housing market optimist at least in the short term.

Share this post


Link to post
Share on other sites

I'm just thinking how you could play the situation to your own benefit, make it work for you rather than against you.

Share this post


Link to post
Share on other sites

I'm just thinking how you could play the situation to your own benefit, make it work for you rather than against you.

You would have to the moment it was announced put in as many low balls as you could and buy the best one.

Beat the rush that would almost certainly follow.

I feel really sh*t typing this out because people are going to think I am for such a policy so again I would be dead against it but what else could you do.

The other sleeper issue is this would increase rents. You would have people who have lived at home move out basically because we have just artificially made house more affordable again. Of course they would not be affordable for long and we would have taken our bubble into tulip territory. Perhaps some time in 300 years Australian housing in the early 21st century will be the textbook bubble case beside the South Sea and Tulip bubbles. People might study it to see how governments can create bubbles and how best to avoid them when the politics dictates to drive them up further!

It really is a joke so few can see what they are doing. It appears to most of us completely transparent and yet no one is saying our government is going to wreck Australia for a generation the way they are going.

Anyway maybe I am speaking too soon and hopefully chim and bern are right and they will show restraint but I suspect otherwise.

Share this post


Link to post
Share on other sites

I'm just thinking how you could play the situation to your own benefit, make it work for you rather than against you.

That is kind of what I was saying, play the long game and buy a house overseas.

Share this post


Link to post
Share on other sites

That is kind of what I was saying, play the long game and buy a house overseas.

Well I haven't figured out how to make that work for me, especially if I'm not going to live where I buy, and I would have to learn all the various local differences to make an informed decision, whereas I do at least have a bit of an idea about Sydney already.

The UK is my only real option for living overseas, but with their austerity budget finding employment in my current area looks bleak for the next 2 or 3 years, but their houses will at least become quite a bit cheaper, and I do have some friends and some family there.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!


Register a new account

Sign in

Already have an account? Sign in here.


Sign In Now