EXCLUSIVE: Should Australia follow Canada's home buyer plan: The experts have their say

In Canada, first home buyers are allowed to dip into their superfunds and withdraw up to $25,000 to put towards a deposit. Funds have to be repaid within 15 years and if the yearly repayment is not made, it is included in your yearly income.  

According to the ABS in early November, Australia’s first home buyer stats hit a new low at just 12.48%. The ABS also forecasted a staggering population growth in Australia over the next, which could tighten the market and the amount of available stock, therefore pushing first home buyers back even more.  

Property Observer asked a range of professionals active in the property sphere to weigh in with their thoughts on the Canadian Home Buyer Plan and whether it should be implemented in Australia.  

Do you think Canada’s home buyer plan should be implemented in Australia? Would it work? Why or why not? If no, what plan should we implement, if any?  

Peter Bushby – President of the Real Estate Insitute of Australia (REIA).

CORE ELEMENTS OF THESE SCHEMES COULD BE ADOPTED IN AUSTRALIA TO IMPROVE FALLING HOME OWNERSHIP

Core elements of these schemes could be adopted in Australia to improve falling home ownership  

The Real Estate Institute of Australia (REIA) has been advocating the commonwealth government establish a scheme to encourage young Australians to contribute to voluntary superannuation, by allowing access to those resources for the purpose of raising a deposit for a first home.  

Canada, Singapore and New Zealand provide good case studies of home buyers using part of their accumulated compulsory salary deductions to purchase housing.  

In Canada, the Canadian Home Buyers’ Plan, that allows first home buyers to withdraw up to $25,000 from their retirement savings plan to purchase or build a home with funds withdrawn to be later repaid over a 15 year period, has been operating since 1992 with around one-eighth of first home buyers aged 25 to 44 participating.  

In Singapore, the Central Provident Fund (CPF) – a social security fund where a portion of an employee’s salary is set aside for retirement, healthcare and housing – is integrated with home ownership with ordinary account savings being allowed to be used to purchase a home. The approach Singapore has adopted to tackle house ownership since the 1960s has been very successful with the level of home ownership in Singapore at 90.1%.  

In New Zealand, a voluntary work-based savings KiwiSaver initiative is designed to help with New Zealanders’ long-term saving for retirement with two features – KiwiSaver home purchase withdrawal scheme and KiwiSaver home deposit subsidy scheme – helping with the overall deposit when buying land to build a first home on.  

Core elements of these schemes could be adopted in Australia to improve falling home ownership, especially among the 35 to 54 age group.  

For home buyers, a lower principal on their loan would mean either lower repayments, or sooner outright ownership. However, the long-run benefits are even more significant.  

With Australia’s ageing population and with older renters spending the largest proportion of their gross income on housing compared to any age group or tenure type households, high rates of home ownership should remain the government’s priority.  

Shane Oliver – Head of investment strategy and chief economist, AMP Capital

A LASTING SOLUTION IS TO BOOST DWELLING SUPPLY RELATIVE TO THE DEMAND FOR HOUSING

The Canadian Home Buyer Plan allowing first home buyers to tap their superannuation to contribute to a home purchase makes some sense as it is a way of providing extra funding to first home buyers early in their life when their focus is getting set with a home but when they are also cash constrained. And it doesn't involve a government handout.  

However, it has two big drawbacks. First by reducing members super balances early in their contribution cycle it will dampen the compounding effect of returns over time and lead to lower retirement balances. Second and most importantly, as with all first home buyer schemes it will simply boost the buying power of first home buyers which, in the absence of any moves to boost the supply of housing, will only result in higher home prices. This has been the experience of all first home buyer schemes in Australia that are not target on new housing construction, regardless of how they are financed. As a result property developers and existing home buyers will be the only beneficiaries as prices simply get bid higher and there will be no lasting improvement in housing affordability.  

The only real and lasting solution to poor housing affordability for first home buyers is to boost the level of dwelling supply relative to the demand for houses. This means faster land release and development approvals and measures to reduce the population growth of large cities. In the absence of such policies first home buyer schemes may sound nice in theory but they are of little use in terms of improving affordability.

Article continues on next page. Please click below.

Andrew Wilson – Senior economist, Australian Property Monitors

GOVERNMENTS SHOULD DIRECT HOUSING MARKET INIATIVES TO THE SUPPLY-SIDE

The first home buyers grant is becoming a thing of the past – and that is where it should remain.

Governments in Australia’s most populous states have recently made significant changes to the grant that in Queensland, New South Wales and Victoria now applies only to the purchase of new dwellings.  

These changes have unsurprisingly created disruptions to housing market activity as first home buyers rushed into established markets before the new arrangements took effect. The surge in demand brought forward has resulted in recent low levels of activity from first home buyers in these markets.  

Aspiration for home ownership in Australia however remains high driven in particular by a robust and resilient housing market that provides reliable, tax-enhanced, long-term capital growth. Other home ownership drivers include cultural and prestige imperatives and security of tenure advantages.  

Australians accordingly do not require incentives for home ownership and housing markets generally remain accessible for first home buyers.  

Latest ABS home loan data for October reports that first home buyer numbers are predictably on the rise again in New South Wales and Queensland despite rising house prices and the lack of a grant for established home purchases.  

The number of first home buyer loans approved in New South Wales was the highest monthly total since the end of last year’s demand surge by that group in November. And similarly in Queensland the total first home buyer loans for October are the highest for nearly a year.  

First home owners are alive and well in Australia with the strong underlying rate of home ownership remaining around where it has been for decades and essentially driven by the enviable long-term resilience of the national economy.

Direct buyer incentives just add to the cost base of housing in a market environment. Governments should direct housing market initiatives to the supply-side with policies that facilitate the construction of dwellings where and of the type demanded, together with the provision of appropriate residential infrastructure.  

Policies designed to pull the workforce away from the CBD should also be encouraged such as decentralisation incentives through regional employment hubs, telecommuting and localised digital work facilities.  

Kevin Lee - Buyers agent at Smart Property Adviser

THE SOLUTION IS TO ABOLISH ALL PROPERTY RELATED STAMP AND TRANSFER DUTIES

As I said a few weeks ago in this publication - we need to stop the ridiculous focus on first time buyers and level out the playing field for all buyers if we really want to stimulate our economy.  

Here's my questions to add to those above: how can property ever be classified as a 'free market' when governments (of every persuasion and at every level) impose massive taxes, stamp duties, levies, rates, fees & charges on the various sectors of the property market?  

Remember also, that in order to influence the smallest sector by volume and size, state and federal governments offer a number of incentives such as cash handouts and discounted (or zero) stamp duty.  

Mortgage Choice CEO Michael Russell says he likes Canada's first home buyers scheme 'as grants are seen as handouts'. Instead of a grant, the Canadian scheme allows people access to a whopping $25,000 from their super on the proviso it's used as a deposit on that elusive first home and repaid to super within 15 years.  

Obviously they haven't seen Sydney house prices!  

This debate has been in the media a bit over the past year and it definitely needs further discussion. Creating another layer of complexity, another set of rules and regulations and yet another layer of beurocracy rarely makes for a better system. It just creates more jobs for beurocrats. And that's the last thing Australia needs!  

But back to the other point - how much super do first home buyers in Australia actually have? And how much would they need to access to buy that first place in Sydney, Perth, Melbourne, Brisbane, Adelaide, Canberra, Darwin or Hobart?  

That was a bit unfair wasn't it ... but hang on. Don't approximately 95% of all first home buyers live in a capital city? And aren't pretty much all of our capital cities median house or unit prices 'up there' in the price stakes?  

Allowing them to access $50,000 of their super would make a small difference - however this is still interfering with a free market.  

The solution, repeat, the solution is to abolish all property related stamp and transfer duties. In every state and territory. At the very least reduce this anti-competitive tax to a maximum of $1,000 per transaction for any buyer, whether they're buying their first or their twentieth property.  

Because after all - it doesn't matter who owns the property. A household of some type will be formed by either the owner and his or her co-inhabitants, or the tenant and their co-inhabitants.