It’s the hot topic that has the nation talking – how can housing be made affordable? Will making housing more affordable for younger first home buyers mean investors end up paying more? What are the options?

Option 1: Rentvesting:

One of the growing trends seen in recent years as house prices in inner city areas have risen, cialis is that more young people are getting into rentvesting. Working professionals under 30 are buying a property on the outer edge of the city or in an area where they can afford to and renting that property out while renting a home for themselves closer to the CBD in an area where they would prefer to live. “I think it’s a fantastic idea, healing not just for younger people. We’ve helped dozens of clients go down the rentvesting path,” says Propertyology Managing Director Simon Pressley who adds this affordable option can help out downsizers as well as first home buyers. Rentvestors can be “significantly better off” renting where they are comfortable living while buying where they can afford to, says Pressley. Rentvestors should research their options and consult a qualified financial advisor to ensure that the sums work in their favour, he adds. If house prices in areas within 15km of our CBDs keep rising, is it time for some home buyers to radically reassess their options as rentvestors have?

Option 2: Limit Negative Gearing:

Labour argues that negative gearing is making housing less affordable for most, particularly for first home buyers. Bill Shorten says that by allowing property owners to offset their asset losses against their income, many first home buyers in particular are being priced out by buyers, typically older couples with deeper pockets buying a second or third house. Labour has proposed limiting negative gearing to just newly built properties and also reduce the capital gains tax discount, with the policy not due to come into effect until 1 July 2017. Limiting negative gearing to just newly built properties is a “poorly thought out” idea, Pressley says. “All it does it highlight that politicians know less about property than the general public.” “Only 10% of new properties sold each year are bought by investors,” he says. Pressley says he often advises clients against investing in new properties due to the taxes attached to such properties. Limiting capital gains won’t stop investors from buying properties and would therefore have little impact on supply and the competition some buyers face at auctions, Pressley says.

Option 3: Let First Home Buyers Use Super:

First home buyers grants have been one way that state and federal governments have historically attempted to make housing more affordable, but these schemes keep changing and the rules vary from state to state. These days the policy is largely limited to buying a new house. Pressley says the limitations that government bodies have placed on these grants have done little to help first home buyers and the programs should be expanded. “Governments should ramp up stamp duty concessions for first home buyers. “When you dictate what kind of property (grants cover), in this case new property, it helps the construction industry, not first home buyers. Make whatever grants are available to whatever property the owner wants to live in – don’t tell them (first home buyers) where they want to live,” he says.

Another option often raised for first home buyers, is letting younger people tap into their superannuation savings to access funds for a deposit. But LJ Hooker Head of Real Estate Christopher Mourd says some younger people may not have built up enough in super savings to take advantage of such proposals, should they become available. “If you are going to buy a home in Sydney or Melbourne, you need a $60,000 deposit, at that age do you have that in your super?” “There are some other really good policies in Singapore and New Zealand that have really good structures which mean people can access their savings (and sometimes super) to buy a home,” says Mourd. Pressley isn’t so sure using super to fund houses will create long terms asset wealth. “Objectively, is it a good decision for the country in the long term? I don’t think so,” he says , adding that if home owners get into financial difficulties they lose could lose their retirement nest egg as well as their house. “There could be a big mess to clean to clean up in 20-30 years,” he says.

Option 4: Increase Supply:

One option with housing is to look at supply and how to make more land available for both house and land packages and development. “What governments can do is look at infrastructure to reduce commuting times,” says Mourd who adds boosting infrastructure outside of our main CBDs by relocating some government agencies could boost employment and create more affordable housing options. “Demand always follows people’s access to work and lifestyle. “If you have regional infrastructure around then people will consider that over and above infill (repurposed land) sites,” Mourd says. While increasing supply may bring prices down, Pressley questions how viable this option is in the long run. “If you want to make housing more affordable the best thing is to increase supply. If we ramp up supply, it makes property in general more affordable, cheaper.” “But over the last two years we’re building in excess of 200,000 properties each year. We’re already building way more property than we need,” he says.

Option 5: Joint Ownership:

For some, jointly buying a property with a close friend or relative could be an option, but Pressley says the key to these arrangements is choosing the right partner. “You have to be careful about who you do that with, but someone who is single may do it with a brother or sister. “It still needs to be treated as a business transaction,” he says adding that both parties need to decide at the outset what would happen if one party wants to buy out or sell out their share. “These ‘what ifs’ need to be thought about carefully and documented.”

Option 6: Social Housing:

Mourd says governments and developers should look at setting aside some properties in new projects for emergency service personnel – police, nurses, doctors, paramedics and the like – particularly for projects built near hospitals. “If something happens (essential service workers) need to be near work,” he says. “If a government approves 50 new apartments, 10 could be put aside for emergency service personnel. It’s how you create opportunity for those people to acquire property they otherwise wouldn’t. It’s how you get the private sector to fund development for properties that are affordable,” he says.

Mourd also nominates Defence housing as an option worth looking at as housing for those serving members is usually built near bases and is designed to suit families. “You have people living in high quality local properties,” he says.

Other Western countries have or are in the process of implementing different schemes to making housing more affordable. In Japan for instance, two generation homes are not taxed if the heir is living on the property when the older parent dies. This has led many older couples to replace the family home with dual generational ones for their children to ensure that the next generation isn’t taxed. In the UK, the Cameron Government has extended the right-to-buy policy of the Thatcher era for shared ownership for those living in housing association properties that allows buyers to purchase a share of their home and pay rent on the remaining share. “That (Thatcher’s right to buy scheme) moved tens of thousands of people into a cycle of wealth creation,” says Mourd. The Cameron Government has also pledged to build 400,000 new homes.



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