The Midday Meal

A repository for the various things i consume in the course of daily existence

Thursday, December 01, 2005

Grown up stuff.

My younger brother brought a house on the weekend. Its quite a nice little place, two bedroom hallway house in Brunswick. It cost him $320,000. It has been something I have been concerned with over the past 12 months, brought into particular focus by the imminent emptying of the departure lounge which our third bedroom has become. The problem is that I am quite confortable paying the amount I pay in rent... but baulk at the prospect of the amount mortgage repayments would be on a house so significantly less featured and attractive than my current abode. House prices here are ridiculous, completely out of step with their real or even relative value.

The problem is that its now gone so far that to correct it might bring the whole house of cards falling down around our ears. By allowing a massive tax loophole for investment property owners being able to offset the interest on their 2nd (or more) mortgages and the cut in capital gains taxes on the sale of those properties the economic success of this country has been built on this over inflated market and the foreign lending that has underpinned it.

Now we have the situation where so few young people can reasonably afford to buy houses (my brother is fortunate because our mother has provided a deposit out of the money made from selling the family home when she downsized). To combat this the government came up with the first home buyers scheme... $7000 towards the cost of your first home. This just about covers the reduced stamp duty the state governments are offering to first home buyers so at best it is a zero sum tax transaction, a decent benefit I guess...

Although surely, if you were interested in encouraging and enabling young people to enter the property market you would turn the incentives around. Make the payments (or at least interest payments) of the mortgage on the primary home tax deductable and reduce the tax breaks for those using property as an economic tool rather than a basic necessity.

This will also further remove one of the major disincentives to returning home to the increasingly large, educated young Australian diaspora for whom returning home means ridiculously high taxes and unaffordable housing.

It might be overly simplistic but it strikes me that these sorts of issues are a hell of a lot more important that any perceived problems with our industrial relations system and is guaranteed to affect more lives than the remote possibility of a significant terrorist incident will.

2 Comments:

  • At 10:08 AM, Anonymous Ange said…

    Here, here. That said, we would be stuffed if the market really crashed, having bought at the top of the market. Being a grown up can really suck.

     
  • At 8:08 AM, Anonymous Anonymous said…

    Personally, i can really understand what you're saying. Just before the property boom hit its peak i purchased a house for 95k. it was a nice buy. 2 years later i hit rock bottom and hard times and had to sell up because lenders wanted my head (i had a business loan and a car loan) on a stick.

    i sold up and paid out all my loans easily with the big profit (sold for about 162k) but was left with not much (about 5k).

    It hurt and now that i've regained my footing and am on the verge of a degree it appears that even with a degree payed job i will struggle to enter this market again.

     

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