Mr Symond presented his suggestions for alleviating the housing affordability crisis to Australia's prime minister, John Howard, and received a tentatively positive response. The opposition has also welcomed suggestions from the industry about how to ease housing affordability, which has recently hit an all-time low.
This presentation follows the recent proposal by the opposition, which called for tax breaks for property investors. The government is expected to reveal its policy in the near future. Mr Symond's report, "Addressing the Housing Affordability Crisis," thus comes at a time when housing affordability is set to become an important election issue.
Mr Symonds's plan calls for tax breaks of up to A$4,725 a year, or about a A$400 a month saving, for the first five years of a mortgage. In the following five years, half of this tax benefit, or around A$200 a month, would then be paid back. The mortgage interest deductibility (MID) would only be available for first home buyers of newly constructed dwellings, which Mr Symond predicts will provide incentives for additional housing to be built. He also estimates that his plan would cost the government A$505 million a year, and that the tax breaks would be used by about 35,000 first home buyers annually.
New approaches to solving the escalating affordability crisis in the Australian housing market should be welcomed and, if implemented, this scheme could help some first time buyers onto the property ladder. However, this is primarily a demand side solution, and would not have a significant effect on the underlying supply side problems. There is thus a risk that providing first home buyers with this subsidy would only serve to drive up house prices even further, and exacerbate the long-term problem of affordability.