Mark Bouris, executive chairman of mortgage provider, Yellow Brick Road, has urged the Government to strengthen Australia’s housing quango and provide tax breaks to mortgage holders. From News.com.au:
[Mark Bouris] says borrowers should get access to the same tax breaks that apply to super contributions for making additional repayments on the principal of their family home.
“It is important that all Australians can achieve their dreams to own a home and retire comfortably”…
Currently, many retirees end up blowing their entire superannuation lump sum payment to pay off their mortgages anyway, leaving them with little in savings and having paid thousands in extra interest payments to lenders over the life of their loan.
Yellow Brick Road wants Hockey to consider a new retirement savings asset class which does not discriminate between extra payments for a home loan and extra contributions to super.
“The Australian Government should reform superannuation legislation to enable Australians to deposit additional savings into a retirement account that is able to sit as an asset account linked to their mortgage for their principal place of residence”.
“Our suggested alternative model would enable Australians to reduce their debt earlier, reduce their housing stress, and build up an asset that has been recognised as being the single most important factor to having a comfortable retirement.”
If Saul Eslake’s 50 Years of Housing Policy Failure presentation showed us one thing, it was that demand-side measures aimed at promoting “housing affordability” and home ownership do not work. Despite the massive decline in interest rates and the myriad of subsidies to first home buyers (FHBs), the home ownership rate has decreased over the past 50 years (see next chart).
Under Australia’s constipated planning system, Bouris’ proposed reform would be self-defeating as the extra capacity to borrow would soon be capitalised into higher home prices. At the same time, the Government would lose valuable taxation revenue for no public benefit.
If Bouris was truly concerned about home ownership and people’s retirements, the best thing he could do is to lobby for an end to policies that distort the housing market and force-up its cost. Freeing-up land supply, planning and infrastructure bottlenecks are obvious solutions, along with ending tax lurks like negative gearing.
I’m sure Australian households would be in a much less vulnerable financial position if they weren’t required to pay-off some of the world’s biggest mortgages.
