5 Targets for First Home Buyer Anger!

Darren Moffatt

First Home buyers have it tough in Australia, no question. If any evidence was needed, just a few months ago a world class rant from a young man on the property hunt went viral. It seems he tapped into a source of great frustration amongst Gen Y first home buyers.

Today however, we have the other side of the coin. Respected business journalist Michael Pascoe argues that more affordable housing is the enemy of small business. He appears to say that it's better for First Home Buyers to struggle with a market where house prices are stable & rising, because the increasing home equity offers an invaluable source of funding for entrepreneurs. 

First Home Buyers, does this make your blood boil!?

As someone who's worked as a bank manager, mortgage broker and has started two businesses, I understand the point Pascoe is making - home equity HAS BEEN a crucial source of small business funding, and by extension, a generator of countless jobs and growth. But it doesn't have to, and probably won't, always be this way. In many European countries for instance, home ownership rates are less than half of Australia's but this has been no impediment to the growth of new business ventures there (I'm obviously NOT talking about Spain, Greece etc). Their saving rate is much higher than here, so traditionally entrepreneurs have been able to tap savings rather than home equity.

The point is it doesn't have to be an either/or proposition; it should be possible to have more affordable housing AND funding sources for entrepreneurs. (And while I'm at it, those calling for more affordable housing would do well to remember that money invested in existing dwellings by first home buyers or investors is unproductive capital. It's better for eveyone if more capital is invested in things that actually create jobs & generates cash for people to spend).  

So, Michael Pascoe aside, where should First Home Buyers direct their anger? For convenience I've developed this handy list, but like all lists it's completely subjective. Maybe you have some better targets? Let me know via the comment stream. Here goes...

1.  The Aussie obsession with real estate.

The culture of our country is a large part of the problem; everyone's obssessed with getting in on home ownership. Such intense competition just makes it more diificult for new entrants - simple supply & demand.

2. Federal Government & Negative Gearing

Baby boomers often get blamed for hoovering up all the investment property stock (they hold about 55% of it, according to ABS), bidding prices up and making it harder for Gen Y to get into the market. But the real culprits here are past federal governments. Negative gearing tax concessions are excessively generous by international standards (where else can you claim on old properties?), but you can't blame baby boomers for taking advantage of government policy. Blame the policy makers.

3. State governments & Stamp Duty

Previous stamp duty concessions for first home buyers have now been waived or reduced in many states, now making it even harder for young people to buy that first home. Former head of Treasury Ken Henry recommended abolishing stamp duty for an annual land tax, but state governments are addicted to this revenue, and really, which politician would be brave enough to ever introduce an annual land tax??? 

4. Property Developers & FHOGs

It seems that almost every other month property developers or their industry bodies call for an increase in First Home Buyer Grants (FHOGs) to help stimulate the market. It's a false economy, and they know it. FHOGs do create more eligible buyers, but the effect of this is a further raising of prices which makes it harder still for those who then come in to join the gravy train later. Guess who wins? The developers, not the poor First Home Buyer!  

5. Bait pricing / dodgy agents

One of the biggest bugbears of any first home buyer is bait pricing. You know the deal: an agent quotes you a price vaguely in your price range so you get excited and go along to the open house or auction, only to see it sell for $50-100k more than what you were quoted. I've seen some first home buyers get smacked over thead with this experience for six months before they realise that they need to drop down the price range for their property search. Bait pricing is extremely difficult to prove and convictions are rare, but the practise appears to be quite widespread in certain areas (though it must be said most agents do the right thing).

Where can you go for help? Glad you asked! Housenet has just released our new property listings search engine. Use our 'Invest' feature to see 'price discounting' & 'days on market' detail for individual properties. It's the first home buyer's secret weapon!

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