FHBs and Affordability

I recently sat on a UDIA panel to discuss the issues surrounding affordability and some of the issues facing certain market segments, and regions for that matter too.  Whilst I think it is unlikely that some of the fundamental inputs will change such as the cost of land, infrastructure costs and even construction costs.  The banks are still requiring more from first home buyers with regards to savings, however interest rates on savings are not particularly good, understandable in the current low interest rate environment.  High and increasing rents will also make saving more difficult.

If we are serious about allowing greater accessibility to the housing market for first home buyers, perhaps an alternative would be to allow the value of a 10% deposit to be capital gains tax free.  That is, a first home buyer who has invested in shares or any other asset which attracts capital gain, could have the tax waived on the amount/asset equal to the 10% deposit of their first home.  After this amount, normal Capital Gains Tax would be applicable.

In theory, the benefits to the community and the economy through someone buying their first home is far greater than the capital gains tax collected through the ATO.  With housing affordability being stretched further as interest rates increase, we need to start thinking outside the square and assisting this buyer segment external of the stimulus measures incurred in 2009.

Food for thought…