It's about the decline in personal household wealth that comes...

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    It's about the decline in personal household wealth that comes from lower home values!

    "It has taken a long time for voters to wake up to the risks that several Labor policy proposals pose for their financial wellbeing."

    "But the two-thirds of Australians with their own homes would be very annoyed to see significant price declines, in part because their home is their largest financial asset and negative equity — when the value of the property is less than the value of the loan — is a very unpleasant position for recent purchasers."
    And Labor's stated aim of raising the CGT and abolishing negative gearing is to lower home values!"

    "When Labor announced its decision to ditch negative gearing, it was a time of rapidly rising house prices and the policy was explicitly about improving housing affordability. Times have changed and investors are largely out of the housing market."

    "Labor must be hoping that voters are beyond paying too much attention to perverse policies."


    https://hotcopper.com.au/data/attachments/1552/1552112-43fee084e6f19bdcbfae434509750b9b.jpg

    Some excerpts from an article on this and my comments:

    ALP policies open the door to perverse home truthsjudith_sloan.png

    It has taken a long time for voters to wake up to the risks that several Labor policy proposals pose for their financial wellbeing.

    Notwithstanding Labor’s rhetoric about targeting the top end of town, many of the policies will actually hurt low- and medium-income earners, as well as retirees on modest incomes.

    This is particularly the case when it comes to the proposal to eliminate negative gearing save for new housing and to double the rate of capital gains tax.


    The changes might be grandfathered, but that doesn’t mean existing property owners will be completely protected.

    Two thirds of Australians are Homeowners!

    About two-thirds of adult Australians own their own home — often in association with the bank, of course.

    To be sure, younger Australians are less likely to own a home. The proportion of 35- to 44-year-olds who own a home is about 60 per cent, down from close to 75 per cent in the early 1980s.

    For those between 25 and 34 years, about 45 per cent are home owners.

    Many younger Australian would like to get into the property market and would be very happy to see property prices fall further.

    But the two-thirds of Australians with their own homes would be very annoyed to see significant price declines, in part because their home is their largest financial asset and negative equity — when the value of the property is less than the value of the loan — is a very unpleasant position for recent purchasers.

    The bank of mum and dad may dry up too!

    The story becomes even more complicated because of the increasing importance of the bank of mum and dad.

    It is estimated that this bank is the 10th-largest lender in the housing market. Some 25 per cent of first-home buyers are assisted by their parents and the average value of the loan is about $90,000, up from $30,000 in the early 2000s.

    But here’s the thing: the ability of parents to help their children get into the property market is often based on the rising value of the family home and/or investment properties. The ongoing role of the bank of mum and dad is not assured, in other words.

    Does grandfathering help?

    No doubt Labor will try to emphasise the importance of grandfathering as a form of protection for existing property owners, but grandfathering introduces its own problems by creating distorted incentives to hang on to assets, thereby disturbing the normal buying and selling flows in the housing market.

    How the bipartisan policy to subsidise some first-home buyers by requiring only a 5 per cent, rather than a 20 per cent, deposit fits in is anyone’s guess.

    Apart from creating an unacceptable risk for taxpayers, there is a distinct possibility all this scheme will do is substitute for the bank of mum and dad as well as encourage first-home buyers to take out larger loans.

    When Labor announced its decision to ditch negative gearing, it was a time of rapidly rising house prices and the policy was explicitly about improving housing affordability. Times have changed and investors are largely out of the housing market.

    Labor must be hoping that voters are beyond paying too much attention to perverse policies.

    https://www.theaustralian.com.au/nation/politics/alp-policies-open-the-door-to-perverse-home-truths/news-story/270fc950a1e6a10ac68e81aeaf133198

 
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