What can be done to improve housing affordability for first home buyers?

| May 14, 2017

There is no one or simple solution to solving the housing affordability issue. Taj Singh, Director and Co-Founder of First Home Buyers Australia, introduces five robust policy suggestions that he believes would have a large impact on solving the housing affordability crisis across NSW and Australia.


Solving the housing affordability issue requires a multi policy approach from all levels of the government. At FHBA, we have been campaigning for a multi-policy approach over the last two years.

Many tax policies are simply too generous for investors, disadvantaging first home buyers. Why does an investor buying multiple investment properties receive more tax help than a first home buyer couple trying to get into the property market?

We have prepared multi policy recommendations for the Australia’s federal and state governments consider the following 5 policies to make the property market fairer for all Australians and to ensure more Australians can achieve their Great Australian Dream of home ownership.

We have prepared multi policy recommendations for Australia’s federal and state governments to consider. We have proposed the following 5 policies to make the property market fairer for all Australians and to ensure more Australians can achieve their Great Australian Dream of home ownership:

  1. Reduce interest tax deductions for investment purposes from 100% tax-deductible to 50% tax-deductible. This means negative gearing will still exist, but there will be a higher incentive for investors to reduce debt, as interest costs will no longer be 100% deductible. (Federal Government)
  2. Change Capital Gains Tax (CGT) discount from 50% from 12 months +, to a tier scale discount system: 0-12 months = 0% discount; 12-24 months = 25% discount; 24-36 months = 37.5% discount; 36 months + 50% discount. This policy should discourage speculative short term investment and encourage long term investment which is good for the economy. (Federal Government)
  3. Provide first home buyers of every state a 50% reduction in Stamp Duty on purchases of existing dwellings and a 100% Stamp Duty exemption on new dwellings. This assists first home buyers with one of the biggest hurdles / costs of entering the property market while still encouraging new property development. (State Governments).

The State Government can take it a step further by abolishing stamp duty for all home buyers and replace it with an annual land tax as this could incentivise more baby boomers and retirees to downsize, allowing for more efficient use of homes (rather than having couples/singles live in 3-4 bedroom houses due to the costs of moving and buying another property, i.e. stamp duty)

  1. Change the land tax system from value based, to property number based. Land tax would apply from property no. 3 +, except from property no. 1 for foreign investors. Some thresholds would still apply.
  2. Create a new First Home Buyers Saver Account (FHSA) that is run similar to a superannuation fund, except for the sole purpose of assisting young Australians purchase their very first home. The enhanced FHSA will not only benefit those in NSW and VIC but also in other states where incomes aren’t quite as high as here. It should include the following features:
  • Run by financial institutions, such as local banks.
  • Ability to salary sacrifice up to $7,500 of your pre-tax annual salary (tax-free)
  • Ability to contribute up to $7,500 of your after tax savings (tax-free)
  • Ability to invest in cash or managed funds offered by the financial institution providers
  • Zero tax on investment earnings in the account
  • You (the account holder) must make contributions in three separate financial years before being eligible to withdraw the account funds for the sole purpose of your first home deposit or to go towards your first home mortgage.

I am of the strong belief that if these policies were implemented it would have a large impact on solving the housing affordability crisis across NSW and Australia.

Taj Singh
Taj Singh is the Director and Co-Founder of Australia’s premier First Home Buyer Organisation – First Home Buyers Australia (FHBA). No matter whether you are still saving for a deposit, are currently looking to enter the property market, or are about to settle on your first home, FHBA has been created to assist you throughout your entire journey towards your first home. Taj Singh is also a Lending Adviser by trade and a former Management Accountant for a Sydney Advertising Agency listed on the NYSE.