Super way to buy home

Australia wouldn’t be where it is, facing record debt, more expenses than income, and a ratings downgrade, if governments could learn to say “No” more often.

So it should have been refreshing last Friday when a parliamentary inquiry into home ownership actually refused to make a recommendation on the basis that they couldn’t do anything about the problem.

Except in this case a small “Yes” was the right answer.

On most points the committee was correct. It’s not so much that housing is unaffordable, as measured by repayments. In most parts of Australia house repayments are actually more affordable than 23 years ago. (In Brisbane this is by a factor of one-third).

And the increase in house prices is a rational response to lower interest rates, which, while they make houses more expensive than 23 years ago, contribute to repayments being  effectively lower.

The committee was also right to point to high rates of immigration stoking demand, combining with state and local government planning laws and taxes restricting land release, to supercharge the supply deficit.

They were also right to point to stamp duty as an inefficient state tax which would ideally be replaced by land tax.

But the one thing they didn’t talk about is the deposit gap.

Ownership rates for Australians aged 25-34 have fallen from 60% to 48%, because an affordable housing loan is only a theoretical concept when you can’t afford the deposit to buy a house in the first place.

But there is a solution, and it makes an appearance at 2.86 in the report, only to be then neglected – allow first home purchasers to borrow from their superannuation savings towards a deposit.

This is not a radical suggestion. It happens in Canada, for example, where one in eight of those aged 25-44 participate.

It makes a lot of sense, because homeownership is the basis of a bearable retirement, and this is recognised in the aged pension asset test which exempts the family home entirely.