Budget 2017's housing affordability plans likely won't have major impact: KPMG

Budget 2017's housing affordability plans likely won't have major impact: KPMG
Budget 2017's housing affordability plans likely won't have major impact: KPMG

The federal government’s budget announcements to make housing affordable has met with mixed reactions, with top accounting and audit firm KPMG saying it won’t do much to cool the hot property market.

KPMG chief economist Brendan Rynne said the budget’s housing affordability moves were “fairly modest and unlikely to have a major impact”. 

“The measures aimed at boosting supply by encouraging the development of new dwellings and better use of existing stock might help the overheated Sydney and Melbourne markets a little,” said Rynne.

Even loan comparison website Mortgage Choice said the measures would not address the affordability crisis.

Mortgage Choice chief executive officer John Flavell said while the government has sought to address the issue of housing affordability, “their measures are likely to have no material impact on the problem”.

He even went further, saying the adjustment to the Medicare Levy “will only serve to increase the cost of living for many Australians, further exacerbating the issues we already face in this area”.

However, the Financial Planning Association of Australia (FPA) had a different take, citing increased complexity to the superannuation system following the announcement that a person over the age of 65 will be able to make a non-concessional contribution to superannuation of up to $300,000 from the proceeds of selling their home from 1 July 2018.

FPA CEO Dante De Gori said it would only add a layer of complexity to the superannuation system.

“The aim of this incentive is to encourage the baby boomer generation to sell, freeing up larger houses for younger families upgrading into more suitable homes. We support this initiative, however these changes add to the complexity of the superannuation system and are only tinkering with the housing affordability problem,” De Gore said.

First home buyers will be able to withdraw voluntary contributions to superannuation made from 1 July 2017, along with associated deemed earnings, for a first home deposit.

Under the measure, up to $15,000 per year and $30,000 in total can be contributed, within existing caps. Concessional contributions and earnings that are withdrawn will be taxed at marginal rates less a 30 per cent offset. Both members of a couple can take advantage of this measure to buy their first home together.

While the FPA supports initiatives to make housing more affordable, the association said accessing super was not the solution to the housing affordability issue, and is not in the national interest.

KPMG’s Rynne added that the First Home Super Saver Scheme will also help new buyers to compete against investors, but overall the Budget “is just a first step”. “More policy initiatives will be needed to tackle this complex problem, with greater co-ordination between all tiers of government and the private sector.” 

The SMSF Association similarly supported the downsizing and first-home buyer announcements, according to a post on the Professional Planner.

On downsizing, SMSFA CEO John Maroney said: “This means people can make a significant top-up contribution to their super funds, allowing them to fund a dignified and secure retirement. While the measure may not be a significant trigger to encourage downsizing, we welcome the ability for older Australians to top up their superannuation where downsizing their home provides them with funds to do so.”

On the first-home buyer scheme, Maroney said it was an “excellent opportunity to engage younger fund members in their superannuation.” 

Emma Power, author for The Conversation, was direct in her comments, saying housing will remain unaffordable, insecure and out of reach for the majority of Australian renters.

“There are no significant funding increases to social housing and homelessness services. There is no increase in rent assistance to help low-income renters in the private rental market,” she wrote.

“Capital gains tax and negative gearing settings remain largely untouched, and the proposed bond aggregator will support expansion of housing aimed at very specific groups.” 

Tags: 
Federal Budget Housing

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