John Symond Housing Affordability Paper
John Symond proposes scheme to alleviate housing affordability crisis in Australia
Please note: This document is designed to be printed double sided.
John Symond, Chairman and Chief Executive Officer of Aussie Home Loans, has proposed an innovative Mortgage Interest Deduction (MID) scheme to assist first home buyers acquiring new homes or apartments.
Mr Symond said, "Unfortunately, housing affordability for first home buyers has continued to deteriorate in recent years. First home buyers are now priced out of the market and are facing accelerating rental payments, while the housing construction sector continues to suffer from low demand.
“Both Federal and State Governments have to date only provided limited assistance and urgent action is required. The housing affordability crisis is a large and complex issue and if ignored the situation can only worsen”, he added.
In a submission handed to the Federal Government and Federal Opposition this week, Mr Symond has proposed tax concessions that address affordability for a core section of the community - first homebuyers purchasing new houses or apartments. The proposal comprises:
- tax deductions for first home buyers of up to $15,000 per annum for five years on the purchase of new dwellings
- payback of 10 per cent of benefit per annum (average of $2,362 per annum) by the first home buyers over the following five years
- continued access to $7,000 First Home Owners Grant.
The proposal promotes a balanced and long-term approach to assisting property ownership for first home buyers and, if adopted, the proposal is expected to deliver the following benefits:
- an expected 15,000 more new homes in Australia each year
- improve housing affordability for 35,000 first home buyers each year
- reduced pressure on the increasingly tight rental market
- productivity stimulus for the new home building sector
- positive social impacts with more families moving into their own home.
It is expected that first homebuyers will receive an average net benefit of $4,725 a year for the first five years following purchase. An average of $2,362 a year of this benefit would then be repaid over the following five years.
Mr Symond said, "The MID scheme will not just be a handout, as first home buyers will be obliged to repay some of the tax benefits they have received in the initial five years of home ownership – a period when their finances are usually at their most stretched”.
The scheme requires a net $505 million annual commitment by Federal government to attract first homebuyers to the market and provide a much-needed stimulus to the housing sector.
BIS Shrapnel, which helped compile the report, estimates that the number of Australians between 25 and 35 years will increase by 36,200 per year over the next five years. The firm also estimates that underlying demand for new dwellings will be 169,300 per annum over the next five years, with commencements to be just 150,000 this year.
Mr Symond said, "The MID scheme can begin operating as early as next year and the benefits will be immediate to both home buyers and home builders, with a positive flow-on effect to the rest of the economy. I believe action needs to be taken now or Australia runs the risk of having an entire generation locked out of the housing market.
An example of how the MID scheme would work:
- A couple earning $40,000 each per year wish to purchase a new home
- They borrow $300,000 to fund the purchase of the property worth $330,000
- At current average rates, the amount of mortgage interest per year is $22,806
- The couple therefore qualify to receive the maximum $15,000 per year deduction
- At current income tax rates, this translates to a net benefit to the couple of $4,725 per year for the five years from the purchase of their home, reducing their monthly interest cost from around $1,900 to just over $1,500
- Over the following five years (ie. years six to ten), the couple are required to repay 50% of the benefit received, amounting to $2,362 per year
- The couple also qualify for the $7,000 First Home Owner Grant payment upfront.
For further information, please call:
Tim Allerton
City Public Relations
(02) 9267 4511