Could this Home Loan idea work, would it save the current gen, and help the next gen. Thoughts, pros and cons.

[hotinco]

We all know what's going on.. no need to rehash. So here is an attempt at a solution.

• A government owned Not for Profit Bank.(let's call it GovBank).
• For Australian citizens who have lived in Australia for 10 years minimum.
• For homes purchase price under $1 million. Provide Zero interest loans.
• Waived stamp duty, waived land tax, 5% deposit.
• Principle place of residence only, but doesn't have to be first home. (Cannot apply to 2nd or more title, but can be rented out, if owner is currently renting elsewhere).
• GovBank loans the amount, at 0% interest.
• At sale of property, GovBank takes 80% of capitol gains. You only get 20%. (Less investment costs into renovation/extensions/upgrades e.g. add a pool or whatever).
• Only available to those earning less than $400k gross p.a.
• Once loan is paid off and house is owned outright, you must continue to pay same loan amount for a further 2 years. Which is net profit to bank. 2 year payment amount is reduced from the 80% capitol gains value. This way noone loses on making money, but GovBank doesn't have to wait for you to sell to make profit.

Basically, it let's people get into houses, and pay the principle only, which alleviates cost of living pressure.

This can get people out of a renter black hole, and allows kids to get into the market.

It also makes customers not dependant on market growth so should slow down house price rises, and reduce the overseas/wealthy investor market interest.

 

[lindseym1013]

@hotinco Sounds like a really expensive way to make houses more expensive.

 

[hotinco]

@lindseym1013 It excludes the wealthy and foreign and its only for PPR. Those with limited budgets aren't going to go into over bidding wars.. they can't afford to. (Which is the majority of people).

 

[_%D7%A1%D7%AA]

@hotinco there will be bidding wars up to the limit. So you'll end up with no homes under 1M because pretty much anyone with an income is going to be able to get this loan.

 

[adam1983irwin]

@hotinco In what universe is 400k a year not wealthy

 

[hotinco]

@adam1983irwin I just picked a number for the example (household income, not individual).

But also..

2 adults with 3 or 4 kids... and bam, u can't afford a house that fits anymore.

Once u get to 200k salary, tax eats almost half. But yeh, 300k household is probably a better upper limit.

 

[adam1983irwin]

@hotinco Bruh you're on some good Boomer crack.

First home buyer schemes from the government cap put at 200k household income and that's still doing reasonably well.

You are very very out of touch with reality.

 

[haroldgreen]

@adam1983irwin Bro I'm telling you as a dirty millennial, a 200k household is not that much these days.

 

[adam1983irwin]

@haroldgreen I'm on 200k and I can tell you that it is. People need to give up the idea of living inner city and come to terms with reality

 

[lindseym1013]

@hotinco Any government intervention that makes purchasing easier inflates house prices.

 

[afrazier]

@lindseym1013 So if gov would actually release enough land to have some housing surplus houses would still go up?

 

[lindseym1013]

@afrazier Land is not a house

 

[afrazier]

@lindseym1013 Land is a big reason why we don't have more houses now. Govt and local councils are very hesitant to release land to build. Which is a factor to current house climate. For decades they have heavily restricted land release.

 

[lindseym1013]

@afrazier It’s a factor for sure, but more land won’t do anything if we are labour constrained for builders

It won’t make houses cheaper if building is more expensive that existing houses.

Housing supply needs to go up, to do that we need to build more houses, which has lots of factors (land, zoning, labour, costs)

 

[augt]

@hotinco Sounds like it would exacerbate the problem.

Interest rates are not the problem. Previous generations dealt with much higher interest rates.

The problem is that house prices are insane. This would encourage people to borrow more and push them up even further.

 

[elana]

@hotinco This will just drive up demand and prices further. All these policies that were designed to get people into their first home earlier have done the same.

 

[bucj]

@hotinco Increasing demand without supply.

 

[pdeem]

@hotinco Here’s an idea. Instead of trying to fix the problem by introducing more legislation. We do the opposite and start unwinding the layers of market manipulation that have been introduced over the decades….Rolling back negative gearing would be a great start.

 

[becky411234]

@hotinco Only problem is they will need houses to buy. This will just increase demand but not supply so the cost will outweigh any benefit.

 

[quint]

@hotinco Some big issues here that no one is pointing out, like the financial damage this would cause the banking sector. Large drops in bank shares, which make up 27% of the ASX200, would be pretty damaging to pension and super funds. Also, $400k gross pa captures many who absolutely don't need help.

It's also really stupid to encourage the government to take out debt to fund a perpetuation of the unsustainable manner in which Australians are housed. If anything, the government should take on debt to build infrastructure and services, and possibly even housing, which enables denser living in cities.