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Don’t you hate it when someone you respect comes out and just says, like, the dumbest thing ever?
Something so idiotic that the credibility they’d built up with you over years, magically goes “poof!”
Damnit! I hate that.
Senator Nick Xenophon is someone with whom I’ve not always agreed, but who I’ve normally respected. But now …
Recently, Nicko has launched his plan to allow Australians to access their super for their first home deposit.
In the name of affordability.
It’s the dumbest plan to help first-home buyers since John Howard’s First Home Owner’s Grant, where $7000, then $14,000, was handed out. That probably boosted prices by $20,000 to $40,000.
Sorry, scratch that. It’s only the dumbest since the first draft of Kevin Rudd’s stupendously daft First Home Saver’s Account, which aimed to “help” property virgins by signing them up to a scheme to lock them out of the market for four years. Seriously! He did that!
While it sounds warm and fuzzy, the last thing virgin buyers should want is for Senator Xenophon to get this thought bubble through Parliament.
A cheaper option would be for you to find the nearest Gen Xer and sign them over your super, as Xers will be selling you your first home as they upgrade.
What’s the Senator planning? He likes Canada’s model, where first-home buyers can access $25,000 from super. They have to pay it back into super within 15 years.
Garth Turner is a former Canadian politician turned financial blogger. Way back, he was one of the pollies who voted FOR Canada’s first home buyer’s scheme.
One of the stupidest things Canada ever did, he reckons. “Now, Nick, we’re reaping the bitter harvest sown when that dumbass legislation passed. Allowing first-time buyers to remove tax-free money to buy a modest home they could not otherwise afford, then restore it to their long-term retirement savings makes perfect sense in theory. In practice and experience, just the opposite,” he penned to the Senator on his website.
In Canada, if you don’t pay it back annually, you pay full tax on it. What percentage of Canadians pay it back? Not many – 47 per cent have never paid a cent back.
Just find the nearest Xer and hand them your super.
Sadly, Nick’s plan has given others a platform. Most of these geese have a poofteenth of his credibility, and are usually crossed with such conflicted interest they trip over if they stand up.
They quote the Singapore example. Ah, Singapore, where employers tip in about 34 per cent to three super-like buckets, one of which is actually a separate bucket aimed to assist home ownership. Australian employers put in 9.5 per cent. Stupid comparison.
Some claim it will “level the playing field” with investors. Oh, come on. How does stealing from your own future level the playing field?
First home buyers get significant leg-ups into property, and rightly so. If a first home buyer in WA buys a new $450,000 home, they pay $4248 in government fees (largely stamp duty), but get back $10,000. They pocket $5752.
An investor would pay $15,800 in government fees. Ergo, first-home buyers get a $21,000 legup.
In other parts of Australia, the gifts can be even more generous. The same $450,000 in NSW would see a first-home buyer receive net cash of approximately $14,700, while a second home buyer would hand over a net $11,000 in government fees. A $25,000 advantage to first home buyers.
One supporter claimed a “potential downside” was that it might put upwards pressure on prices.
Goose. Let me put it this way. Let’s say you’ve got Mick and Mary, Ben and Bonita and singleton Roger bidding on a place at a tight auction.
Now, let’s give Mick and Mary an extra $50,000 ($25,000 each), Ben and Bonita $40,000 (they were a bit younger) and Roger an extra $25,000.
What’s going to happen to that house price? And yes, it is literally that simple.
“It will save them having to pay lender’s mortgage insurance,” said another. OMG! This is like watching “Dumb & Dumber III” or reading pages of Darwin Award dumb-ways-to-die entries.
When prices get pushed up, they’ll be paying LMI again in no time. Sheesh.
First home buyers, accessing your super to buy homes is not a solution. You’ll pay more for the house. You’ll gear up higher. You’ll pay it off for longer.
And you’ll hate having given those Gen Xers your super.
Senator Nick has had a rare total brain fade. I think he’s beginning to realise that. Come on, Nick, it’s not too late to say you stuffed up.
Bruce Brammall is the principal adviser with Castellan Financial Consulting and a licensed mortgage broker (www.castellanfinancial.com.au). E: bruce@castellanfinancial.com.au.