We’re not expecting huge news from the federal government regarding fixes to housing affordability – especially on big ticket items such as negative gearing and capital gains tax concessions – however leaks point to a few items on the cards.
First home buyers are expected to receive tax support to give them a leg up in a market that currently greatly preferences investors.
The Australian Financial Review says sources have confirmed the government will introduce a “first home savers account” into which first home buyers will be allowed to salary-sacrifice contributions for a home deposit from pre-tax pay, with interest also taxed at concessional rates. There will, however, be caps on the amount that can be contributed annually and an overall cap on the fund. A similar Labor plan to introduce a first home savers account, announced in 2014, had the government co-contributing 17 per cent.
There is concern – such as with the previously mooted plan to enable first home owners to draw down superannuation for a house deposit or increasing first homeowners’ grants – that this could increase demand and push house prices higher.
There is also the expectation that a vacant house tax will be imposed on investors who leave residential properties empty, a measure that the Victorian government has already implemented.
The underutilisation of property by retirees is also expected to be tackled with exemptions from new superannuation limits offered to those who sell the family home in order to downsize.
On the supply side, there will be more City Deals struck as a way to spur new development. Our recent Flash Forum participants all said that increasing supply was the most important factor in alleviating housing affordability concerns, though this needed to be balanced by measures to tackle demand, and was largely state government driven.
Don’t expect major tax reform
Mr Morrison recently said a fall in apartment prices of 1.2 per cent in April and a slowdown in house prices to 0.2 per cent meant that the tightening of lending rules by the Australian Prudential Regulation Authority was working.
In an interview with the AFR, he said the turning of the market was proof that changes to negative gearing and capital gains tax were not necessary, and played down expectations that the federal government would intervene.
Labor’s shadow treasurer Chris Bowen, however, said: “Housing affordability, which doesn’t involve proper reform of negative gearing in particular is nothing short of a swindle.”
- See the housing affordability policy created for treasurer Scott Morrison at The Fifth Estate’s Flash Forum