The housing and real estate industries have welcomed a promise by Labor to set up low-tax saving accounts to encourage first home buyers to save more towards a house deposit.
Under the scheme, which will cost $600 million over four years, first home buyers can make a pre-tax deposit of up to $5000 per year into a special deposit saving account that will be taxed at just 15%. Another $5000 per year after-tax can also be deposited, with interest from the full sum in the account also taxed at the low 15% rate.
The money can only be accessed after four years and must be put towards a home deposit – money can still be withdrawn if not used for that purpose, but the value of the tax concessions will be subtracted from the sum withdrawn. A minimum deposit of $1000 per year is required keep an account open and the total amount deposited cannot exceed $50,000.
By encouraging first home owners to save, the scheme will help reduce debt levels and the use of expensive deposit guarantees like mortgage insurance, according to Housing Industry Association senior executive director Chris Lamont.
ANZ chief economist Saul Eslake maintains that increasing demand for housing only makes it less affordable.
Lamont rejects the view that the scheme will simply result in higher house prices because first-home buyers, having saved their deposit, will simply take out a bigger mortgage.
“The scheme is for first-home buyers, they’re not buying McMansions. In fact, usually they go for the cheapest house they can get into, so it is primarily to assist people to get a deposit rather than going to trade-up buyers who tend to go for the bigger houses,” Lamont says.
Also welcoming the announcement today is Real Estate Institute of Australian chief executive Graham Doyle, but he warns that the $1000 minimum will be tough for some people to meet.
“Give how high rental prices are at the moment, $1000 per year each year may be a tough ask for some people,” Doyle says.
And, he warns the scheme will not provide a quick cure for Australia’s housing affordability woes.
“This will promote saving, and that is a good thing, but it’s obviously going to take some time and there are other things we need to keep looking at to improve affordability,” Doyle says.
This morning Labor also unveiled a $150 million promise to build up to 600 new houses and units across the country to provide better access to housing for homeless people.