$6.8bn stamp duty bonanza – at the expense of FHBs

From Mortgage Professional Australia.

Huge NSW revenues from stamp duty have lifted state out of debt but prospective homebuyers are suffering

The New South Wales State Government received $6.8bn from stamp duties on residential property over the past year, the State’s 2017-18 Budget has revealed.

The NSW State Government is now free of debt, with a $4.5bn surplus expected for 2016-17 and a surplus of $2.0bn expected next year. Stamp duty makes up a huge proportion of the State’s income, with revenues jumping 10% over the past year and expected to grow 6% each year for the next three years.

As the State Government grows richer, NSW’s first home buyers are struggling. In a CoreLogic survey of Australians of all ages, 48% of those in NSW said stamp duty was the most significant obstacle to housing affordability. Three-quarters of respondents felt that removing or reducing stamp duty would be an effective way to improve housing affordability in New South Wales.

CoreLogic found that the average household in Sydney would take 1.7 years of no spending whatsoever to save a 20% deposit. Getting on the housing ladder in Sydney was far more expensive than any other city, including Melbourne.

Stamp duty concessions

Perhaps buoyed by its new found wealth, NSW is finally following the lead of other states such as Victoria by expanding stamp duty concessions.

From July 1 stamp duty for FHBs will be abolished for new homes up to $650,000 with discounts on properties of up to $800,000. Additionally, grants of $10,000 will be available for new homes of up to $600,000 and for FHBs who build their home. Stamp duty will no longer be charged on lenders mortgage insurance.

Over the past twelve months, 45.4% of dwellings sold across New South Wales had a price tag of $650,000 or less, notes CoreLogic director of research Tim Lawless. However, in the Sydney metropolitan area, just 25.8% of dwelling sales were at a price of $650,000 or less.

The State’s stamp duty concessions may push Sydney FHBs towards units, given 33.5% of units sold in the last 12 months went for under $650,000. On a $650,000 dwelling purchase, a FHB will save $25,000 by not paying stamp duty.

According to Lawless, “we can expect first home buyer sales to stall over the remainder of June and likely surge higher from the beginning of the new financial year.”

First-home buyers remain out in the cold, despite affordability improvements

From The Real Estate Conversation.

The March quarter edition of the Adelaide Bank/Real Estate Institute of Australia Housing Affordability Report shows housing affordability improved across  the country, but the number of first home buyers decreased in all states and territories.

The proportion of family income required to meet loan repayments decreased by 1.3 percentage points during the March quarter to 30.4 per cent. The result was 1.3 percentage points lower than for the corresponding quarter in 2016, showing affordability is improving.

REIA President Malcolm Gunning said first-home buyers make up only 13.4 per cent of total owner-occupied housing. The rate of first-home buyers has been on a downward trend for more than five years.

Damian Percy, general manager Adelaide Bank, said, “While the improvement in housing affordability for the March quarter is to be welcomed, we are still in the midst of a housing affordability crisis and we need to treat it as such. Recent measures by governments to assist first home buyers are similarly welcomed, but the reality is that it will take years for these policy measures to wash through the system and translate into meaningful price action.”

“The number of first-home buyers decreased to 20,677 over the March quarter – a drop of 11.2%,” said Percy.

Percy said the nation’s housing affordability crisis was having a “profound impact” on the “economic and social well-being of the nation.”

Gunning said, “It will be interesting to see the effects that stamp duty exemptions and concessions announced in Victoria and more recently in NSW have on first home buyers.”

“We anticipate that more first home buyers will be enticed to enter the market place. However, it will take time for any response to filter into our data as the changes do not come into effect until 1 July 2017,” Gunning said.

Over the March quarter, the proportion of median family income required to meet rent payments increased by 0.1 percentage points to 24.6 per cent. However, the results varied across the states and territories, with rental affordability improving slightly in New South Wales, South Australia, Western Australia, and the Northern Territory.

Fast facts from the Adelaide Bank/REIA Housing Affordability Report

The average loan size to Australian first home buyers is now $372,620 – a decrease of 4.3 per cent over the March quarter but an increase of 2.3% compared to last year.

Victoria is the state with the largest number of first-home buyers. First home buyers now make up 21.6% of the state’s owner-occupier market.

Median rents increased slightly, meaning that during the March, rental affordability declined slightly.  The proportion of family income required to meet median rents increased by 0.1 percentage points to 24.6 per cent.

Rental affordability declined for the quarter with an increase of 0.5% of income required to meet median rents.

In NSW, the proportion of family income required to meet loan repayments is 5.7% higher than the nation’s average. NSW remains the least affordable state or territory in which to buy a home. First home buyers now make up only 12.3% of the state’s owner-occupier market – the lowest level in the country.  Rental affordability declined for the quarter with an increase of 0.5% of income required to meet median rents.

In Queensland, the proportion of income required to meet home loan repayments decreased to 26.7%, a 1.3 percentage point drop over the quarter. The proportion of first home buyers in the state’s owner-occupier market was 23.9%.  Rental affordability declined slightly.

The proportion of first-home buyers in South Australia‘s owner-occupier market recorded an increase to 16.8%.  Rental affordability improved by 0.2 percentage points.

Western Australia recorded a 6.5% decrease in the number of first-home buyers over the quarter. The proportion of first home buyers in the state’s owner-occupier market was 31.5%. Rental affordability in Western Australia improved during the March quarter with the proportion of family income required to meet the median rent decreasing 0.5 percentage points to 18.6%.

The number of first-home buyers in Tasmania decreased by 7.5% for the March quarter or 11.1% compared to the same quarter of 2016.  The average home loan size to first home buyers increased by 5.6% to $240,333.  Rental affordability declined with an increase of 1.3% for the quarter.

The Australian Capital Territory recorded an 18.2% decrease in the number of loans to first home buyers. First home buyers made up 17.8% of the Territory’s owner-occupier market. Rental affordability declined for the quarter.  The National Capital remains the most affordable state or territory in which to buy a home or rent.

The number of loans to first-home buyers in the Northern Territory decreased by 15.8%. The proportion of first home buyers in the Territory’s owner-occupier market was 19.8%. Rental affordability improved with a decrease of 0.8%.

Are first home buyers locked out of housing?

According to UBS, first time buyers are pretty much locked out of the property market. ‘Typical’ first home buyers are facing ~11 years to save; and ~40 years in Sydney!

Housing affordability is extreme as house price-income surged to a record 6.5x

UBS already ‘called the top’ of housing, with a key reason being that affordability is stretched, as the house price-income ratio surged to a record high of 6.5x, up sharply from 4.5x in 2012 (& >doubling from 3x in 1996). While interest rates have fallen to a record low, the mortgage repayment share of income still lifted to a near decade high, & the key issue for first home buyers (FHBs) is the ‘deposit gap’ even before buying.

‘Typical’ first home buyers facing ~11 years to save; and ~40 years in Sydney

UBS have now created a new and dynamic interactive model to estimate how long it would take a FHB to save a deposit to buy a home (click here for the model). The findings are confronting. We estimate a ‘base case’ scenario for a ‘typical’ FHB would take ~11 years to save for a home based on assumptions including: 1) a 10% deposit is required; 2) individual income is AWOTE of ~$80k per year; 3) saving rate is 5% of gross income (i.e. $4k per year); 4) home price today is $400k (~average FHB price); 5) home prices grow in line with household income ahead at 3% per year. However, given recent macroprudential tightening including for high-LVR loans, if we instead assume a 20% deposit is now required, then the time to save more than doubles (due to compounding) to ~24 years. Alternatively, saving a 10% deposit to buy at the average Sydney house price of $1.2mn would take an incredible ~40 years to save.

If house price vs income growth repeats, FHBs likely never can save enough Importantly, the key driver of time to save is house price growth vs income.

In the last 5 years, house price growth averaged 7%, but income only 4%. If this were to be repeated ahead, a FHB would likely never be able to save a 10% deposit – unless they were given (at least part of) the deposit (i.e. from the ‘bank of mum and dad’). Note that due to the frequent changes of Government policy on housing incentives/taxes (& other costs), our model purposely excludes these factors. However, they can be input to the model directly by the user by adjusting the required deposit or purchase price. For instance, the recent FHB super saver scheme potentially reduces the required time by up to several years (contributions are capped at $15k/year and $30k in total).

NSW first home buyer demand set to surge post July 1

From CoreLogic.

Abolishing stamp duty for first home buyers is likely to create some headaches for eligible buyers who have recently entered into contracts. Additionally we can expect first home buyer activity to stall before surging higher on July 1 2017. The long term outcome may be self-defeating due to higher demand pushing up prices.

The decision yesterday by the News South Wales Government Premier Gladys Berejiklian to provide first home buyers with a stamp duty exemption for properties with a price tag under $650,000 is likely to boost demand for this under represented segment of the market. Based on recent Australian Bureau of Statistics (ABS) data, first home buyers comprised only 8% of owner occupier mortgage commitments in March 2017, which is only marginally higher than the record low of 7.5% recorded in September last year and well below the long term average of 17%.

According to the latest CoreLogic ‘Perceptions of Housing Affordability’ report, it highlighted that across New South Wales the largest proportion of respondents (48%) identified that stamp duty was the most significant obstacle to housing affordability. Additionally, almost three quarters of respondents (74%) felt that removing or reducing stamp duty would be an effective way to improve housing affordability in New South Wales.

Clearly the state government is responding to one of the most significant pain points for prospective buyers.

The current policy provides a stamp duty exemption to first home buyers purchasing a new home with a price tag under $550,000. The new policy has substantially broader scope, providing an exemption for both new and established housing with a price tag under $650,000 and sliding discounts up to $800,000.

To put these limits into context, over the past twelve months, 45.4% of dwellings sold across New South Wales had a price tag of $650,000 or less and 58% of dwelling sales had a price tag $800,000 or less. The proportion of properties that meet the exemption criteria falls away sharply if the analysis is confined only to the Sydney metropolitan area where 25.8% of dwelling sales over the past twelve months were at a price of $650,000 or less.

With a substantial premium on detached housing, the proportions are also substantially different between the broad product types. The past twelve months saw 20.0% of Sydney houses sell for $650,000 or less while unit sales comprised just over one third of all sales (33.5%) at or below this price.

Additionally, with investor demand likely to be slowing due to higher mortgage rates, tighter credit policies and low yields; there is the potential that a rise in first time buyer demand could fill the ‘hole’ left by fewer investors in the market and offset the recent slowdown in the pace of capital gains.

First home buyers still need to contend with the challenges of raising a deposit, which is another major barrier to market entry. Housing prices in Sydney are the highest amongst the capital cities, with the latest data from CoreLogic putting the median house price at just over $1 million and median unit price at just under $743,000. Those buyers who can’t stump up a 20% deposit have been given another leg up, with stamp duty for lenders mortgage insurance also abolished.

Stamp duty on lenders mortgage insurance is charged at 9% of the premium; so a first home buyer with a 5% deposit on a $650,000 property is likely to save themselves around $2,250 (based on a premium of $25,000).

Removing or reducing the transactional costs for first home buyers is likely to provide both positive and negative consequences across the New South Wales housing market.

From a positive sense, policies aimed at improving housing accessibility for first time home buyers are likely to be positively received. Sydney is Australia’s most unaffordable housing market by any measure, and for many buyers, the cost of entry, including stamp duty and raising a deposit, is the most significant barrier to entry. On a $650,000 dwelling purchase, a non-first home buyer would be paying stamp duty costs of around $25,000; so the exemption is a substantial cost saving for a first home buyer.

On the negative side, it’s widely accepted that policies aimed at stimulating demand tend to push prices higher; there is a possibility that the new policy could ultimately be self-defeating, increasing housing demand which could place further upwards pressure on the price of housing which will exacerbate the affordability challenges even further.

The new policy comes into effect on July 1st, so we can expect first home buyer sales to stall over the remainder of June and likely surge higher from the beginning of the new financial year. For those buyers who are potentially eligible for the new exemptions but have recently entered into contacts, there is likely to be some severe disappointment that these rules aren’t applied retrospectively.

NSW Government Reveals Housing Affordability Plan

So NSW has perpetuated the “quick fix” approach to housing affordability, alongside taxing foreign investors harder and changes to planning. The removal of stamp duty concessions to property investors may slow that sector, but the fundamental issue is that supply is not the problem many claim it to be.

Lets see if first time buyer property values rise by the amount of the increased incentives, as has happened elsewhere.

Premier Gladys Berejiklian, Treasurer Dominic Perrottet and Minister for Planning and Housing Anthony Roberts announced the far reaching changes on which could save first homebuyers up to $34,360. The package includes:

  • Abolishing all stamp duty for first homebuyers on existing and new homes up to $650,000 and stamp duty discounts up to $800,000. These changes, to be introduced on 1 July 2017, will provide savings of up to $24,740 for first homebuyers
  • Abolishing the stamp duty charged on lenders’ mortgage insurance, which is often required by banks to lend to first homebuyers with limited deposits, providing a saving of around $2,900 on an $800,000 property
  • Doubling the foreign investor surcharge from 4% to 8% on stamp duty and 0.75% to 2% on land tax
  • Removing stamp duty concessions for investors purchasing off the plan
  • Committing $3bn in infrastructure funding from Government, councils and developers to accelerate the delivery of new housing
  • Fast-track approvals for well-designed terraces, townhouses, manor homes and dual occupancy by expanding complying development to include these dwelling types
  • Greater use of independent panels for Councils in Sydney and in some regional areas to ensure development applications are done efficiently and to ensure the integrity of the planning process
  • Measures to maintain the local character of communities

“I want to ensure that owning a home is not out of reach for people in NSW,” Berejiklian said.

“These measures focus on supporting first homebuyers with new and better targeted grants and concessions, turbocharging housing supply to put downward pressure on prices and delivering more infrastructure to support the faster construction of new homes.

“This is a complex challenge and there is no single or overnight solution. I am confident these measures will make a difference and allow us to meet the housing challenge for our growing State.”

Former Reserve Bank of Australia Governor Glenn Stevens advised the NSW Government in developing its housing affordability package. His report to Government was also released on Thursday.

“I would like to thank Mr Stevens for his valuable advice and insights during the development of this package,” Berejiklian said. “In particular, his advice about avoiding any unintended consequences on the market was greatly appreciated.”

Perrottet said the Government would take advantage of its strong Budget position to give a leg up to prospective first homebuyers while also investing more into targeted infrastructure to support housing growth throughout Sydney and parts of regional NSW.

“As a Government, we have always focused on supporting first homebuyers and this package takes it to the next level,” Perrottet said.

“We know how challenging it can be to enter the property market and are pleased to be providing even more financial support for people wanting to make their first purchase.”

Roberts said the package included measures to speed up planning processes to ensure developments get off the ground as quickly as possible.

“While we have done well to release an unprecedented amount of land over the last six years, we need to do better with our development application process to ensure we are keeping up with demand,” Roberts said.

“That is why we are simplifying complying development rules for greenfield areas and establishing specialist teams to help speed up the rezoning process for residential development, while maintaining the local character of communities.”

As reported in Australian Broker.

Experts bust the mortgage deposit ‘myth’

From The New Daily.

When it comes to the housing debate, there’s one number that just won’t go away: 20 per cent.

Many fear that’s how much they’ll have to save for a deposit. It’s easy to understand why – popular measures of affordability, such as those compiled by CoreLogic and CoreData, often assume a 20 per cent lump sum.

Except it’s not.

Back in 2015, the Reserve Bank noted: “the deposit required of a first home buyer is no longer necessarily around 20 per cent of the purchase price, but rather, more often in the 5–10 per cent range.”

Regulators have tightened the screws since then, but there are still mortgages with below 20 per cent deposits to be found, according to Dr Ashton De Silva from RMIT’s Centre for Urban Research.

He said homebuyers taking out bigger loans should consider the benefits of getting into the housing market now, rather than waiting to reach a certain deposit.

“It’s not just a case of working out that you’ve got to pay another $50,000 in interest. What is the economic benefit of securing that place now?” Dr De Silva told The New Daily.

“We expect people are making the decision that: ‘It is better for me to take on that extra cost and secure this dwelling.’”

Two Australians earning the average full-time wage, with average living costs, will likely qualify for a loan just over $1 million with one of Australia’s big banks.

Finder, a financial comparison website, lists a bevy of acronyms that offer low deposit loans, including: NAB, ME, CUA, IMB and HSBC.

Many lenders have created new financial products to help homebuyers enter the market, resulting in Australia having, according to Dr De Silva, “one of the most product diverse markets in the world”.

One option is lenders’ mortgage insurance, which lowers required deposits to a minimum of 5 per cent, meaning purchasers of a $500,000 property can require a lump sum of only $25,000.

Mortgage insurance is usually paid as a one-off charge, with the cost calculated as a percentage of the loan amount and based on the size of your deposit.

Occasionally, it can even be ‘capitalised’ into the value of the loan – which means you borrow more to cover the cost of the insurance. If you do this, you’ll pay slightly higher repayments, rather than a big sum up front.

It’s important to note the insurance only protects the lender against the risk of you defaulting on the mortgage, not you.

You need $200,000 to meet the 20 percent deposit on a $1 million dollar mortgage, an enormous sum for most Australians.

With mortgage insurance, a couple taking out a loan with a 5 per cent deposit would need $50,000, plus the cost of the insurance.

Some lenders won’t charge insurance on loans with a 10 per cent deposit, but this depends on job security and credit history.

Two Australians earning the average full-time wage, with average living costs, will likely qualify for a loan just over $1 million with one of Australia’s big banks.

Dr De Silva warned home buyers should do their homework and weigh up the costs and benefits of different loans.

“One thing that needs to be at the forefront is, ‘Can I afford to ride out any crisis that may arise?’”

Associate Professor Chyi Lin Lee, an expert in property market economics at the University of Western Sydney, pointed to 20 per cent deposits as a main source of difficulty for many homebuyers.

“We need to find an innovative way to help owner-occupiers to get into the market,” he told The New Daily.

Professor Lee said schemes which help homebuyers jump over the deposit hurdle – such as controversial first homebuyer grants – can be successful, despite the upward pressure they put on prices.

A caution: don’t overextend

Professor Lee warned lower deposits shouldn’t be an excuse for buyers to take out bigger loans than they can pay off.

This was backed by Dr Rachel Ong, deputy director at the Bankwest Curtin Economics Centre, who said people taking out loans with low equity can expose themselves to higher repayments.

“It isn’t a good idea to try and lower the minimum deposit because there’s people who might not be able to meet the payments, and the consequences of that are all the negative and quite severe,” Dr Ong said.

“There’s a reason why the minimum deposit is set at what it is.”

CoreLogic numbers dispel smashed avo theory

From The Real Estate Conversation.

The 20% deposit and stamp duty required to buy a house in Sydney is $158,933, based on new CoreLogic data. That’s equivalent to 20 years’ worth of smashed avo.

The 20 per cent deposit and stamp duty required to buy a house in Sydney is $158,933, according to new data from CoreLogic. That’s the equivalent of 7,224 serves of $22 avocado on toast – or avocado on toast every day for 20 years.

Even in the nation’s most affordable city, Hobart, buyers must accumulate $64,477 for the deposit on a house and to cover stamp duty. That’s 2,930 serves of your favourite brekkie – or avo on toast every day for eight years.

Source: CoreLogic.

The numbers put Bernard Salt’s jocular observation of young adults wasting money on smashed avo into perspective: even if young Australian do give up extravagant brunches and put the funds towards saving for a house, it will take years, even decades, to accumulate enough cash for the deposit and stamp duty on a home.

Core Logic has used house and apartment prices in the 25th percentile to compile the data, considering that first-home buyers are generally purchasing at the more affordable end of the property spectrum.

Cameron Kusher, research analyst with CoreLogic, said the research does not factor in stamp duty exemptions below a certain price threshold in some states.

Kusher also said it’s not always necessary to have the whole 20 per cent deposit, although a lesser deposit will usually mean that required lenders mortgage insurance, which is an additional cost for the home buyer.

In a paper on the research, Kusher said housing affordability is worsening as property prices soar higher as wages growth stagnates.

In the 12 months to April 2017, Sydney dwelling values increased by 16.0 per cent, and Melbourne values rose 15.3 per cent. Yet household incomes in Sydney only rose 4.6 per cent in the year to March 2017, while household incomes rose a mere 2.7 per cent in Melbourne, according to data from the Australian National University

“Entry into the housing market remains a real challenge,” said Kusher.

“Even in cheaper areas, household income growth is fairly slow which makes saving a deposit difficult,” he said.

“It is unclear as to how, absent a big fall in property prices, housing affordability for first home buyers can be greatly improved,” he said.

So eat your smashed avo and enjoy it; scrimping on brunch isn’t going to be enough to buy you a property in the current market.

First home buyer demand bounces higher

Low rates combined with recent changes to various first home buyer initiatives has helped encourage more potential property buyers into the market, new research has revealed.

Mortgage Choice’s latest Loan Purpose Report found first home buyers accounted for 14% of all loans written by the company in April, up from 12.2% in January.

“In the first quarter of 2017, we saw a rise in the number of first home buyers taking out loans through Mortgage Choice,” Mortgage Choice chief executive officer John Flavell said.

“This growth in first home buyer demand can be attributed to a number of factors, including low interest rates, stagnating property price growth and enhanced first home buyer incentives.

“In the first instance, property prices have started to stagnate across the country, with CoreLogic data showing the median dwelling value in Australia rose just 0.1% over the month of March.

“Furthermore, interest rates remain at historical lows, which has helped keep the cost of borrowing at affordable levels.

“In addition, some states have made changes to their various first home buyer incentives over the first quarter of 2017.

“In Western Australia, the Government announced a temporary $5,000 boost to the First Home Owners Grant. The boost payment is available to eligible first home buyers who enter into a contract between 1 January and 30 June 2017 to purchase or construct a new home, and owner builders who commence laying foundations of their home between those dates.

“As a result of all of these factors, we have seen a slight uptick in the total level of first home buyer demand.”

Looking ahead, Mr Flavell said he wouldn’t be surprised to see first home buyer demand increase further as potential buyers look to take advantage of the low rate environment and various home buyer incentives soon to be on offer.

“In Victoria, some first home buyers will soon be given access to a $20,000 boosted grant. Those purchasing or constructing new homes in regional Victoria will be eligible for the grant.

“In addition, from 1 July 2017, first home buyers purchasing a home with a dutiable value of no more than $600,000 will not have to pay stamp duty – which can be a real financial impost for many first home buyers.

“These two initiatives alone are likely to encourage more first home buyers in Victoria – especially regional Victoria – onto the property ladder.”

But while Mr Flavell said he wouldn’t be surprised to see first home buyer demand climb slightly higher in places like Victoria, he said more still needs to be done by the other states and territories to help this home buyer group.

“While we have seen a slight improvement in first home buyer demand over the first few months of the year, total first home buyer demand remains very low.

“In April 2014, first home buyers made up 17.8% of all loans written through Mortgage Choice. Today, that percentage has slumped to just 14%.

“We believe more needs to be done to help first home buyers get onto the property ladder.

“The Federal Government announced earlier this month that it would allow first home buyers to salary sacrifice part of their income into their superannuation account in order to help them build their property deposit faster.

“While this initiative is great in theory, it is unlikely to have a huge impact. At best, a couple who salary sacrifice a portion of their income into their super might be able to scrape together enough money to pay for the stamp duty charged in markets like Sydney.

“Indeed, there is nothing to suggest that this new scheme will deliver a different result to the spectacularly unsuccessful First Home Saver Account initiative that was launched by the Rudd Government in 2008 and withdrawn from the market in 2014.”

Super saver accounts fail to impress

From The New Daily.

The government’s plans to allow first home buyers to salary sacrifice up to $30,000 into superannuation accounts looks set to do little to make houses more affordable.

“Under this plan, most first home savers will be able to accelerate their savings by at least 30 per cent,” Treasurer Scott Morrison said in his budget speech.

From July 1, 2017, people can contribute up to $15,000 a year, taxed at 15 per cent, into their superannuation accounts for a home deposit.

Withdrawals will be allowed from July 1, 2018, and will be taxed at marginal tax rates minus 30 percentage points.

Dr Sam Tsiaplias, economist at Melbourne University, said the measure would not improve housing affordability “in any substantive way” because it favoured the well-off.

“Most of the people who might take this up will be able to afford a deposit anyway,” he told The New Daily.

“If the objective is to help a relatively small number of households save faster it probably can do that.”

Because the money will be deposited in Australians’ super funds, it has been suggested the funds would need to adjust their programs. But Dr Tsiaplias said the accounts would probably be so unpopular that they wouldn’t affect the super funds “in any way”.

Superfund Partners director Mark Beveridge said the government’s “30 per cent” sales pitch would simply leave super funds offside trying to accommodate the new funding arrangements.

The new schemes do not rely on Australians to open new bank accounts. Instead, the government will allow deposit savers to salary sacrifice into their superannuation accounts.

Bill Watson, CEO of First Super, said people who use the new scheme need to be wary of the risks that come with investments.

“There’s a risk that what you think is a saving is exposed to losses in the market. What a person would need to do is put it into a cash investment, but you get pretty much the same return as a bank deposit.”

Saving schemes like this have been tried in the past. The first Rudd government introduced First Home Saver Accounts in 2007. Savers were taxed at 15 per cent on the first $5000 they deposited each year, while interest was taxed at 15 per cent. The government also kicked in a 17 per cent contribution a year on the first $6000.

However, Labor’s scheme saw little uptake. Only 48,000 accounts were opened, compared to the projected 730,000. It was abolished in 2015 under the Abbott government.

Wayne Swan, treasurer during the first Rudd government, speaking on CNBC on Wednesday, said his scheme would have shown its impact if it had not been abolished.

“It was a far more generous proposal than the one they announced last night,” Mr Swan said.

“[This is] just window dressing because they’re ideologically opposed and won’t touch the negative gearing provision which is the key to solving this problem.”

First Home Buyers Australia co-founder Daniel Cohen said he supported the scheme, but wanted more to be done to address affordability.

“It doesn’t single handily solve the property crisis,” he said.

“We also wanted to see measures that decreased the amount of investor activity in the market, we were also disappointed that there weren’t more cuts to tax incentives given to investors.”

Negative gearing came in for only minor changes in the budget, with some tightening around travel expenses and depreciation deductions.

The government expects its home buyers grant to cost $250 million and its changes to negative gearing to save $540 million over the next four years.

Suncorp Targets First Time Buyers

Suncorp has announced an exclusive new offer for first home buyers to “help them realise their property ownership dreams”.

Suncorp’s Home Package Plus Special Offer for First Home Buyers allows customers to choose from a Standard Variable rate or a 5 Year Fixed rate of 3.99% p.a. on new lending of $150,000 or more.

The initial Home Package Plus annual fee will be waived and most customers will also be eligible for savings on their Lenders Mortgage Insurance (LMI) , as well as building and contents insurance.

Suncorp EGM Stores and Specialty Banking, Lynne Sutherland, said buying a home is one of the biggest financial commitments customers make and it’s becoming increasingly difficult for those looking to enter the market for the first time.

“Housing affordability is creating a barrier for young people wanting to purchase their first home,” Sutherland said.

“The average age of home owners across the country has increased by 10 years, and while we know property ownership isn’t for everyone, it’s still a goal for many Australians.

“Our Home Package Plus Special Offer for First Home Buyers gives customers choice by providing the same low rate on a Standard Variable or 5 Year Fixed loan, while also offering a range of discounts on some of the additional fees and products that go with home ownership.

“Where the customer is borrowing more than 80% of the property’s value, we will contribute $1,000 towards their mortgage insurance premium.

“Eligible customers will also be offered 20% off the first year’s premium for Suncorp issued building and contents insurance, as well as savings on Suncorp Home Loan Protect for new policies issued.

“This offer is especially timely for first home buyers in Queensland, with the Government’s First Home Owner’s $20,000 grant only available until 30 June 2017.

“Entering the property market can be daunting, but these savings could be the difference for many of our customers in realising home ownership.”