Cycling into work yesterday I bumped into the good Senator Nick Xenophon. I had to yell out “No super access for First Home Owners”! He responded so I hit the brakes and we had a short chat. In good news, Nick said that he had changed his position: ‘I’ve been listening to the people’.
We are relieved to hear this. For decades the HIA have been advocating this policy line. Enabling First Home Owner’s (FHO) access to super for a deposit on a house will give them greater purchasing power. This deposit will be leveraged for even greater credit access, delivering exactly the same effect as the First Home Owners Grant (FHOG) that Steve Keen warned us about so devastatingly all those years ago. Luckily through the learnings many are doing online, the Treasurer was hammered by the general public and many mainstream economists when he expressed support for the super access concept.
Amidst the scramble of a quick discussion in a crowded walkway, apparently Nick has been listening to South Australia’s HomeStart. The senator seemed to be advocating for FHOs to gain easier access to credit.
However, as the lights changed and his advisor dragged him away, my thoughts quickly moved to where he had shifted. Easier access to credit. Doesn’t that sound familiar? Just like the FHOG and FHO super access, any access to greater purchasing capacity is bound to be capitalised into higher land prices. This is in effect another seller’s subsidy.
Senator Xenophon asked me to email him as a follow up. I did so and have allowed 24 hours for him to clarify his position. Unfortunately he hasn’t responded yet . Hopefully he will answer my invite to appear on the Renegade Economists radio show.
For an MP so staunchly against gambling, it is surprising he falls for the easy credit line. The average age of FHO’s is 38 but the political agenda continues to fall into line with the property lobby.
My email to Xenophon included the following:
Whilst some sort of financial assistance like Key Start (WA) is useful, it still only concerns buyers. Low deposits encourage more people into the market, pushing prices up. It is property speculation that must be curbed. Three, no make that four low hanging fruits I advocate are:
– remove or greatly curb the use of interest-only loans – is there any more short term tool than that? They should not be allowed in real estate. When matched with post-code hopping, CGT is avoided to deliver immense short term profits
– speak out about 40 year mortgages!!!! These have slipped under the radar and will only encourage greater debt servitude. Outrageous.
– Negative Gearing limited to new builds only, and deductions allowed on one property per nuclear family only (or defacto relationship).
– Significant Investment Visas – REITs are loving these. Curb the ability to channel these rising billions into RE vehicles.
Obviously there are deeper reforms necessary, but this is a starting point to question the speculative mentality etched into policy makers. The anger of the locked out and indebted is mounting, as this cheeky video demonstrates. What will we do if the long awaited Senate Housing Affordability Inquiry advocates similar policy fraud? Their report has been delayed four times and will now be released May 8, leading to an interesting pre-budget media cycle.
We can only hope Senator Xenophon takes some advice from those outside the real estate and finance industry.