Policy Positives - First Home Buyers set to win at the polls...or are they?

As we get closer to the federal election, the policies around housing have become increasingly positive with both Liberal and Labor making some bold attempts to win votes.

But are you going to take the bait? Do you believe these can really help you get into the market or is it going to be a case of short term gain and long term pain.

This is my 5th election since working in the property industry, and it’s been the most positive I’ve seen. There has been a real focus on the first home buyers and affordability. Below I’ll take you through my thoughts on pro and cons. Let’s get into it.

Here is a breakdown of the main policies between the two major parties.

Liberal

Deduct mortgage interest - this means if you earn under the $175k (single) and $250k (couples), you are able to claim the interest on your mortgage as a tax deduction…🤯
While there is no limit on the purchase price of the home, it has to be new and you can only claim the interest on up to $650k, but for 5 years.

So what does this save you? Let’s say you have a loan of $650k @ 6.1% that’s around $40k in interest which can be used to reduce your taxable income. If you are on $150k per year, it means your taxable income would be $110k and approximately a $13,000 saving x 5 = $65,000. Not bad right.

Withdraw up to $50,000 from your super - I understand that the majority of people in this country rely on super for retirement, but I always thought if I had the money now, I could do so much more with it compared to a superfund with all their fees etc.

Well now that option is available to first home buyers. As you can tell, I believe this is a pretty good option for those wanting use “their money” earlier to get into property.

The super withdraw is only for new builds to drive construction due to the benefits it creates to the overall economy. The issue with this is, construction is scary for a lot of people, builders are going bust left right and centre, and the costs are still high after covid. So while I don’t mind these policies, I feel like once you think about them, its not going to help enough people get into a property.

Labor

5% deposit - Versions of this have been around not only at a federal level but also at a state level. Essentially those who don’t have a “bank of mum and dad”, who will guarantee their loan in order to reduce the deposit amount, can have the government come in and guarantee it for them.

Bank of mum and dad, this a term used commonly now where children are going to or receiving financial support from their parents, however not everyone has access to this.

While you don’t need someone to guarantee your loan, but if you can, it will reduce the deposit require by the bank and save you on lenders mortgage insurance (LMI). The banks view and categorise everything based on risk, if you have a 5% deposit and no guarantor then you’ll most likely need to pay lenders mortgage insurance because you are a higher risk. This a policy taken out by the bank incase you default on your loan, oh an you have to pay for it for the bank.

The main difference here is that its not just for new builds, its for any type of property which I actually feel is a better scenario because not everyone wants to build as above.

My general feeling towards these policies is that they are “OK”, but nothing that I feel is going to move the needle enough.

There is also the risk that the access to easier money, will drive prices up by that amount. When I first got into the industry it was around the time of first home buyer grants in Vic for building were doubled from $10k to $20k, and the build cost went up by that much.

So do they work…most likely yes to a degree, but at what cost in the long run?

Thanks for reading, this is just the start. I have a heap of things coming and honestly can’t wait to kick off the First Home Club officially.