housing affordability left off Budget agenda? WHY??? by Anna Mendonca - Marrickivlle Real estate

housing affordability left off Budget agenda?  WHY?? SMH 13/5/15

First home buyers are borrowing more than ever before, yet the 2015 Budget failed to tackle housing affordability.

First home buyer numbers fell to 14.7 per cent in March, from 15.1 per cent in February, and the average loan size is up $5,200 to $326,300, according to the Australian Bureau of Statistics, yet the Federal Government did not deliver any relief in the Budget.

In fact, the Federal Government may have "given up" on first home owners grants, according to AMP Capital head of investment strategy and chief economist Shane Oliver.

One of the main factors driving the booming market at present is low interest rates. Photo: Fiona Morris.

Giving more money to first home buyers pushes prices up and affordability had become an "issue for the states to handle", he said.

States and territories currently offer grants for new property only, yet it is often more expensive to buy brand new properties to qualify for the grant.

PRDnationwide national research manager Diaswati Mardiasmo hoped an established property grant would be on the agenda.

"I was hoping the federal government would realise this and thus put out a policy that addresses it – maybe something like the state government is providing an amount to first home buyers for new homes so we will provide an amount to first home buyers for current stock,"  Dr Mardiasmo said.

"It's unfortunate that there is nothing really targeted at the property industry, though the budget does acknowledge that property is probably going to be one of the few industries that is going to prop up the economy for a while," she said.

Mr Oliver expects momentum in Sydney's housing market to slow over the year, with the main factor driving the market at present "being low interest rates."

Over the long term, these rates may actually increase, with the Budget suggesting signs of positive economic growth in the future, said Domain Group senior economist Andrew Wilson.

"With the deficit decreasing over four years and unemployment expected to be down, it's a question of when interest rates will rise over that time," Dr Wilson said.

This won't be any time soon, according to Mortgage Choice chief executive John Flavell, who expects low rates to be maintained for some time.

"With interest rates set to remain at historically low levels throughout 2015, the housing sector remains positive for both current mortgage holders and those looking to enter the property market," Mr Flavell said.

However, rising prices may be cancelling out the benefit of low interest rates for first time buyers.

The government didn't touch the Real Estate Institute of Australia's pre-Budget submission to allow first home buyers access to superannuation to fund a deposit and there were no changes to the axed First Home Savers Accounts (FHSAs).

Account holders can withdraw funds without restrictions in July 2015. 

The 40 recommendations made by the Senate Housing References Committee affordability report released in May, included creating a new version of the FHSAs.

It recommended that state and territory governments maintain the first home buyer grants, but consider introducing means testing, as well as maintaining appropriate value limit caps.

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