Super fights to continue as Labor vows to axe first home buyer scheme

Labor will axe the Morrison government’s program that allows first home buyers to access their superannuation, vowing to follow through with a key recommendation from the Financial Services Inquiry to use super solely to look after Australians in retirement.

With new figures showing the First Home Super Saver Scheme is attracting a small fraction of new entrants into the property market, shadow treasurer Chris Bowen has confirmed Labor will phase out the scheme while also legislating an objective for super.

The scheme, which enables first time buyers to access extra savings put into their superannuation account, was introduced in the 2017 budget by then treasurer Scott Morrison. He argued it would help young people accelerate their savngs to buy into markets in which prices were growing at double-digit rates.

Between the start of the program on July 1 last year and the end of January this year, 2374 people have made requests to access their super under the program. That equates to fewer than 4 per cent of all first home buyers to have been granted a home loan over the past 7 months.

They have sought the release of $28.4 million from the Tax Office, or $11,962 per person.

Since people have been able to access their super, the actual number of first home buyers has fallen by 10 per cent.

In Queensland, loans to first time buyers have dropped a quarter while in Victoria they have edged down by 11 per cent

A quarter of those to have used the scheme withdrew money in its first month of operation.

Labor voted against the scheme when it was created by the Coalition government, and Mr Bowen says that if elected the ALP would phase it out.

He said current users of the scheme, originally predicted to cost the government $250 million over four years, would not be affected.

“It was always a fig leaf to cover up their failure to properly deal with housing affordability,” he said.

Mr Bowen said Labor would also return to a recommendation from the Financial Services Inquiry, that reported to the government in 2014, to legislate an objective for superannuation.

The report recommended that superannuation’s primary objective be set as to “provide income in retirement to substitute or supplement the age pension”. Mr Morrison and then financial services minister Kelly O’Dwyer agreed to the recommendation and promised to have it in place by the end of 2016.

“The objective will be a valuable yardstick against which to measure competing superannuation proposals, providing certainty that measures that do not accord with the objective will be held up to scrutiny,” they said.

The bill was introduced into the upper house in November 2016 and the Senate’s economics committee endorsed the proposal, albeit with a dissenting report from the ALP, in February the following year.

Three months later, the government unveiled its first home buyers scheme, which is at odds with the Murray recommendation.

Since then there has been no debate on the objective. While technically on the Senate notice paper for future debate, it is one of just four bills from 2016 that the government has failed to bring on for debate.

This week, Treasurer Josh Frydenberg said the government continued to back the Murray inquiry recommendations, including setting out an objective for superannuation.

“The bill is in the Senate,” he said.

“The government continues to work with all parties to secure its passage through the Senate.”

Mr Bowen said Labor would work with stakeholders in the super sector to agree upon an objective against which any future policies on superannuation could be judged.

“We’ve been open to setting this objective since it was recommended and we intend to legislate an objective,” he said.

The current inquiry by the House economics committee into Labor’s franking credits policy has revealed many individuals believe superannuation is more than just for retirement.

Several individuals have told the committee that Labor’s policy will force them to use their superannuation savings, reducing the amount of “left-over” super they will have to pass on as an inheritance to their children.

Liberal MP Craig Kelly backed their concerns about inheritances.

“One of the great reasons that people save in Australia and go without things throughout their lives is that they want to be able to pass some of their wealth on to their children, and that is an incentive for saving,” he said earlier this month.


Fears one million Aussie homes could soon be owned by foreign buyers

Is Communist China taking over Australia?

Australia is selling off natural resources, farmland and property to China at a “crazy” rate – putting us at risk of becoming the “24th province” of the East Asian behemoth.

That’s according to real estate expert Doug Driscoll, who warned of the urgent need to start a national conversation about foreign ownership of residential property in particular.

While interest from overseas buyers has decreased in recent years, the Starr Partners chief executive said our overall rate of foreign ownership was still alarmingly high.

And he said a report released last month by Chinese international property portal showed there was now an “insatiable appetite” for Australian property among Chinese buyers, with our softening housing market boosting interest.

In 2017, ANZ found foreign buyers owned up to 400,000 Australian homes. Today, Mr Driscoll estimated that figure would be “close to 500,000”.

ANZ also estimated foreign investors bought between 30,000 and 50,000 new dwellings in 2015-16.

At that rate, Mr Driscoll said it “won’t be too long” before a million homes were in foreign hands, with buyers from China and India the most common demographic.

“It doesn’t take a rocket scientist to wonder what impact that could have on our economy,” he said.

“We’re only a population of 25 million with 10 million dwellings, and if we’re not careful we could be overrun quite easily.”

Mr Driscoll said it was a difficult topic to broach, with those who voiced concerns about foreign ownership often accused of racism

But he said it was essential to “leave emotions at the door” and look at the facts.

“I’m not being jingoistic or xenophobic. It’s absolutely crazy how much of Australia we’re selling off to China, and it surely won’t be long until they have far more influence in our day-to-day lives,” he said.

“It’s irrelevant whether (buyers are from) China, India, Great Britain or the moon – it lacks foresight.

“I look at the facts, and there’s a really high number of current properties owned and acquired by overseas buyers.”

Mr Driscoll also took pains to point out the difference between local buyers of Asian descent – who are clearly Australian – and overseas residents based outside the country who often leave their properties vacant for large chunks of the year, leading to the “ghost house” phenomenon.

“I’m not saying we should stop foreign buyers, but it should be more difficult because a lot leave their properties empty, which clearly has an impact on the rental market, and those ghost homes also have a wider impact on the microeconomy ? what happens to the local coffee shop or newsagent when there are fewer people living in the area than there should be?” he said

Mr Driscoll acknowledged fines had been introduced for foreign owners who left their properties vacant but said they were too small to affect offshore-based “multi-millionaires”.

He said we should strike a balance between New Zealand’s ban on most foreign homeowners and the 15 per cent tax imposed on foreign buyers in large parts of Canada.

“Last year, Chinese developers acquired a third of all residential development sites in Australia ? that’s astonishing,” he said.

“We need to be open for business to China and India ? they’re the countries with the most foreign investors with a burgeoning middle class of hundreds of millions.

“But we need to introduce stringent rules and regulations regarding foreign investment because the government’s interest should be protecting its citizens.”

He said, at the moment, the only factor that could limit Chinese buyers was restrictions placed by the Chinese government in an attempt to stop local money leaving the country.

Mr Driscoll also said Labor’s proposed changes to negative gearing and capital gains tax – in a bid to make it easier for first homebuyers to get their foot in the door – were unnecessary given first homebuyer activity had already increased in recent years.

But he believes changes to those policies would make property less attractive to local investors, which could impact house prices ? and lead to an “influx” of foreign buyers who he claimed were using “ingenious” ways to get money illegally out of their own country, particularly in China where they are only allowed a maximum of $50,000 a year.

“If they are getting this money out of China, then they are finding ways to get it into the Australian system,” he said.

However, a spokeswoman for the office of Opposition Leader Bill Shorten told independent experts such as Treasury and the Grattan Institute did not believe changes to negative gearing would affect property prices.

She stressed foreign investors could only buy new properties in the country and that new property was also exempt from Labor’s restrictions on negative gearing – and that both policies were designed to encourage investors to build new housing and not speculate on existing housing.

Meanwhile, chief economist Nerida Conisbee said changes to negative gearing wouldn’t be enough to entice back foreign investors in droves.

“I don’t think (changes to negative gearing) will lead to a recovery of offshore investment unless we see price growth returning, cut taxes for offshore investors, ease up on finance and have more development,” she said.

“There’s nothing at this stage to suggest foreign investors will be coming back to Australia any time soon.” 16, 2019


RBA says it could cut interest rates over weakening economy

The Reserve Bank of Australia has revealed it may cut official interest rates, with governor Philip Lowe saying the economy

could be weaker than it had expected.


In his first major speech of the year, Dr Lowe told the National Press Club in Sydney that the RBA’s central forecast is for

dwelling investment to fall by 10 per cent over the next two-and-a-half years.


The bank left official rates steady at 1.5 per cent on Tuesday following its first meeting of the year, but that followed 

a string of poor key data releases in recent days, including an acceleration in the fall in house prices across Sydney and Melbourne.


Financial markets already put the chance of a rate cut this year at better than 50-50 even though the RBA has maintained – 

until today -that it’s most likely next move would be to increase the cash rate.


But Dr Lowe on Wednesday said that the bank may have to change its position.


“Looking forward, there are scenarios where the next move in the cash rate is up and other scenarios where it is down,” he said.


“Over the past year, the next-move-is-up scenarios were more likely than the next-move-is-down scenarios. Today, the probabilities

appear to be more evenly balanced.”


Dr Lowe said much would hinge on the strength of the jobs market, with unemployment now at 5 per cent.


Despite the low jobless rate it has not translated into a sharp lift in wages.


On Monday, the ANZ’s closely watched measure of job advertisements turned negative for the first time in three years.


The governor said if the job market tightened then rates would rise but any softening would force the RBA to reassess the situation.


“If Australians are finding jobs and their wages are rising more quickly, it is reasonable to expect that inflation will rise 

and that it will be appropriate to lift the cash rate at some point,” he said.


“On the other hand, given the uncertainties, it is possible that the economy is softer than we expect, and that income and 

consumption growth disappoint.


“In the event of a sustained increased in the unemployment rate and a lack of further progress towards the inflation objective, 

lower interest rates might be appropriate at some point. We have the flexibility to do this if needed.”


Dr Lowe said the bank had downgraded its forecasts for the economy which is now tipped to grew by 3 per cent this year and 

2.75 per cent in 2020. He said this should be sufficient to see a “gradual” reduction in the jobless rate.


Dr Lowe attempted to put the recent fall in house prices in some context, noting the sharp run up in values in Sydney and Melbourne 

over recent years.


While conceding those who have bought into the market in the past two years might be suffering some pain, there was no obvious 

signs this was playing into the broader economy.


“Continued low income growth, together with falling housing prices, would be an unwelcome combination and would make for a softer 

outlook for the economy,” he said.


“Some Australian households have high levels of debt, so there is a degree of uncertainty about how they would respond to this

combination. So we are monitoring things closely.”


Dr Lowe said this “adjustment” in the housing market was affecting the economy more broadly through a slowdown in residential

construction. The bank believes dwelling investment is likely to fall by 10 per cent between now and mid-2021.


There had been concerns that this week’s banking royal commission final report could lead to a tightening of credit conditions 

which would then feed into the broader economy.


Dr Lowe said credit standards had undergone a necessary tightening over recent years, conceding there had been concerns that 

lending to small businesses may had swung “too far” away from the sector.


“In that context, I welcome the report of the royal commission and the government’s response,” he said.


“The commission’s recommendations that bear on credit provision are balanced and sensible, and should remove some uncertainty.


“I also welcome the commission’s focus on: the importance of service – as opposed to sales – in the financial sector; the necessity 

of dealing properly with conflict of interest issues; and the importance of accountability when things go wrong.


“Addressing them is central to rebuilding the all-important trust in our financial system.”


SMH /6 February 2019


Chinese home buyers set to snap up Australian property in 2019


The number of Chinese buyers of Australian homes is likely to remain steady this year in what’s being seen as a major boost for the weakening domestic property market.

Continued wealth growth in China – with dollar-worth per adult having risen four-fold over the past six years – an eye for an Australian bargain, a weak yuan and the trade war between the US and China are all predicted to be factors in keeping investment here bubbling along.

The upbeat forecast comes even as foreign buyers face extra state taxes on their purchase and struggle to obtain finance, according to the new report Australia 2019 Outlook for Chinese Residential Real Estate Buying  by Chinese international property portal

“Unlike Australians, Chinese also lack appealing alternative investments at home,” said Juwai chief executive Carrie Law.

“Bank deposits earn unnaturally low rates of return, Chinese stock exchanges are still immature and were the world’s worst performing in 2018, Chinese real estate is tightly regulated to make investing difficult, and peer-to-peer lending and private equity funds have collapsed due to fraud, poor management, and government crackdowns.

“Because few other appealing investment opportunities exist, Chinese have put 53 per cent of their wealth into real estate. In a 2018 survey, Chinese overseas investors named residential property their favourite asset class.”

The report estimates that mainland Chinese buyers will have spent $US129.3 billion on global real estate last year, a growth rate of between 3 per cent and 8 per cent over the previous year.

That level is likely to remain stable this year, with Victoria set to continue receiving the highest share of investment, Sydney coming in second, and Brisbane third, with Adelaide and Canberra next.

In terms of buyer interest, inquiries jumped 58.1 per cent in the fourth quarter last year compared to the same period in 2017.

The forecast is backed up by Australian agents who routinely deal with Chinese residential buyers. Monika Tu, director of agency Black Diamondz, says 2019 has already kicked off strongly with seven groups of potential Chinese buyers among the nine groups inspecting a $10 million property with six bedrooms and feng shui design in Sydney’s Pymble at the weekend.

“The demand is still there, but the biggest challenge is getting their money out of China or getting money from local banks,” she says. “But there’s a big advantage there for the vendors. Because they’re often now negotiating longer settlements, they’re paying more to do that, which often means big gains for sellers.

“And Australia is still a preferred destination for them, although the local politics is creating uncertainties, particularly in the investment market.”

Chinese specialist at Sydney Sotheby’s International Realty Lu Lu Pallier also believes that 2019 will continue to see similar levels of Chinese buying as 2017. “The biggest influence is government policies both in China and Australia, and neither of those have changed,” she says.

“But we will see an effect on the off-the-plan market as a lot of people are coming up for settlement this year. Restrictions on taking their money out of China and lending restrictions here mean a percentage won’t be able to settle, will lose their 10 per cent deposit and the property will go back on the market and prices will go down further.”

Victoria is set to again see the lion’s share of Chinese money. The state, according to Foreign Investment Review Board data, receives $4 of foreign real estate investment for every $3 that goes into NSW and $2 for Queensland.

“Melbourne retains clear advantages over Sydney in terms of lifestyle, prices, and also a foreign buyer stamp duty that, at 7 per cent, is one point lower than the NSW equivalent,” says Law.

“[But] we see no chance Sydney will lose its No.2 spot this year. Sydney is better known among Chinese, who consider it the iconic Australian city, with the harbour, Harbour Bridge, Opera House, and Bondi Beach. Very few attractions in Melbourne have earned the same level of awareness among Chinese consumers.”

The Chinese market in Brisbane is driven largely by families whose children are studying in the city and want to house them in a property they own. In 2018, more than 33,000 Hong Kong and mainland Chinese students were studying in Queensland – up from about 21,000 in 2015, a 57 per cent increase over four years.

The forecast is that Chinese buyers will continue to focus on new apartments and house and land packages particularly in outer suburbs with new estates where developers or third parties can provide financing.

SMH / JAN 21, 2019


The crucial data to watch as Australia’s housing downturn unfolds

Australian home prices have now been falling for over a year, led by increasingly steep falls in Sydney and Melbourne, Australia’s largest and most expensive housing markets.

Many suspect the falls will continue for some time yet with the only real area of debate being just how large the peak-to-trough falls will be.

The downturn has already left its mark on residential construction, leading to large declines in building approvals and activity, especially for apartment building, along with a decline in employment across the sector.

The question that many are now grappling with is whether the downturn will lead to similar weakness in other non-housing areas of the economy. In particular, consumer spending, accounting for over 50 per cent of GDP.

For the vast majority of Australian households, the family home is the largest store of wealth. And with prices falling in many parts of the country, including in the most populous areas, there is a growing sense of unease that it could see consumers starting to cave, creating downside risks for broader economic growth.

To this point there is no right or wrong answer — some believe the perceived reduction in household wealth will crimp household spending. Others, however, believe strong labour market conditions and legislated and potential further income tax cuts will be able to offset the negative wealth effect from housing, allowing households to maintain their spending levels in the period ahead.

To David Plank, Head of Australian Economics at ANZ Bank, it’s the income side of the equation, rather than the housing downturn, that will likely determine what the future holds.

“We think it difficult to argue there will be no wealth effect [from the housing downturn],” he said in note to clients.

“In our view, the fall in the household saving rate in recent years has been in part due to rising wealth. At the very least, we expect declining house prices to lead to a stabilisation in the saving rate, if not an up-tick.”

Changes in household wealth have often been influential on the level of disposable income saved by households.

In recent years, the proportion of disposable income saved has been falling, suggesting higher wealth levels, in an era of weak income growth, has encouraged households to save less in order to sustain their spending levels.

Now that wealth levels have been falling — not only due to declining home prices but recent weakness in Australia’s stock market — ANZ sees that trend stalling or reversing slightly, casting doubt over the outlook for the largest part of the economy.

For Plank, if households begin to hunker down by saving more, income levels will play a crucial role in determining whether that will lead to a slowdown in household spending.

“What a stabilisation in the saving rate means for household consumption will critically depend on what happens to household income,” he says.

“Tax cuts — which may be brought forward by the Government ahead of this year’s election due to the improved fiscal position — will provide a material boost to disposable income. We also expect wage growth to accelerate somewhat over 2019 and 2020, so long as employment growth remains robust.

“These factors will mean the household saving rate could stabilise without a dramatic slowing in household spending.”

Plank also notes that the current situation is somewhat unique, noting that rather than being driven by higher mortgage rates, the downturn in the housing market has largely been caused by the introduction of tighter lending standards.

“Past declines in house prices have been caused by higher interest rates. And higher interest rates would also be expected to slow household spending. The initial trigger for this housing downturn is different from those in the past, with it having been a tightening in the availability of credit rather than higher interest rates,” he says.

“This difference may mean a weaker relationship between house prices and consumption than in the past.”

Plank says tighter credit conditions may have also been responsible for the sharp drop in Australian new car sales late last year, creating uncertainty about the impact of sliding home prices on discretionary spending by households.

“We think it reflects the impact of tighter credit and is not necessarily evidence of a strong wealth effect,” he says.

While Plank suggests the uncertainty means the linkages between wealth levels and household spending may not be as strong as they were in the past, he admits that recent trends point to downside risks for household spending in the period ahead, including the potential for a larger-than-expected slowdown.

“We don’t think this will be the case given the nature of this cycle. But there is a lot going on in the current housing downturn that is unique, so we have to be open to the possibility that it might,” he says.

ANZ is currently forecasting that home prices in Sydney and Melbourne will fall 15per cent to 20per cent from their previous cyclical peak, a scenario it says will see the RBA hold off lifting official interest rates until the second half of 2020.

Financial markets currently hold a different view, putting the probability of the RBA cutting its cash rate by 25 basis points by November this year at around 50per cent. An increasing number of economists are also adopting this view, including Capital Economics who are now forecasting two rate cuts by the RBA by the middle of next year.

From a domestic perspective, updated data on home prices, employment, inflation and household spending in the coming months will likely determine whether even easier monetary policy settings from the RBA are justified.

Business Insider /21 January 2019

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