Consumer trust isn’t something to be taken for granted, but reports from the UK, US and here at home are all pointing towards an uplift in trust levels around financial advice, which can only be a welcome development.
There are significant tailwinds behind the financial advice industry at the moment, but some major obstacles are still preventing advice practices from taking advantage of surging demand according to a new study from CFS.
Mixed views on Federal Government property proposals
The Liberal Party joined the ALP in focusing on housing affordability during their formal campaign launch this week. The announcement was headlined by two fairly major policy changes, one of which wasn’t automatically accepted by the ALP, as has been the case for both parties for some time.
The first change, which has been flagged for several years, is the reduction in the age at which Australians become eligible for the Downsizer Contribution. The Downsizer allows anyone to contribute an additional $300,000 each into their super, outside of the normal $110,000 per year non-concessional contribution cap.
The age eligibility limit was set to be reduced to 60 on 1 July, but the Liberal Party will move this to 55 if they are re-elected. The policy is one of many that are aimed at getting the property market moving once again, with many long-term property owners unwilling to make the downsizer decision due to the threat of state-imposed stamp duty. Offering some tax efficiency on the other side appears a step in the right direction with the ALP agreeing to the proposal.
The second carried more significance, as under the proposed ‘Super for Houses’ policy as it has been named, anyone buying their first home will be able to access up to $50,000 from their superannuation savings, up to 40 per cent of their balance, to put towards the purchase of a home.
There are a number of rules, and likely more to follow, but most significantly, the funds will need to be repaid into superannuation when the acquired property is sold, along with any capital appreciation. Whilst the initial commentary was about the risk of dipping into one’s retirement savings to pay for their home, this ignores the fact that both sharemarkets and property have delivered near identical returns over decades.
The proposal was met with fierce resistance from the ALP, major economists and most important the industry super fund sector, who would likely bear the brunt of the circa 100,000 young people that are likely to be drawing from their super. It is clear there are interests on both side that are being challenged and it marks a significant shift by the Liberal Party.
Concerns about the impact on property prices and whether it will actually increase the stock for sale are well founded, however, with both sides offering different modelling of the same proposals, it would seem the end result is somewhere near the middle, as it usually is. Interestingly, similar policies have been used in the likes of Singapore, Canada and New Zealand.
The Retirement Living Council of the Property Council of Australia has fallen into the more positive camp welcoming “a commitment from the Coalition to incentivise older Australians to unlock their home equity and get the country on a critical path to “right-sizing”, offering strong praise of the extension of the downsizer contribution.
The property market remains hamstrung by weak supply, driven by poor planning, higher building costs and most important the benefits of negative gearing, with none of these issues likely to be resolved any time soon.
Executive Director of Retirement Living at the Property Council of Australia Ben Myers said the announcement was an important step in encouraging older Australians to find a home that suits them better, while freeing up housing supply for younger, growing families. “Encouraging older Australians to right-size, not only contributes to healthier ageing, it’s also one of the smartest and fastest ways a government can boost much needed housing supply for families, said Myers.
Commenting on the home buying scheme, Chief Executive Ken Morrison said “The Super Home Buyer Scheme is another demand-side measure supporting the worthy goal of home ownership, but the primary challenge is to provide the housing supply and choice our growing communities need”.
“While targeted demand-side policies to support aspiring homebuyers are welcome, a supply crunch is coming and this needs be the focus for whoever wins government next Saturday,” he said.
