Julia, Tony …. tell us about your first home
Scott Pape
Friday, August 06, 2010 at 10:03pmSCOTT Pape asked Julia Gillard and Tony Abbott where they bought their first homes and how much they paid for them. Their responses make for interesting reading ...
This week I was surprised to find that the burning issue of this election is not boat people, healthcare or the size of each leader’s ears - it’s housing affordability.
Well, at least according to news.com.au’s interactive voting tool, which polled more than 11,000 voters on their top election issues. Just under 30 per cent nominated housing affordability as their No. 1 issue.
Yet in all the baby-kissing, hard-hat-wearing, baby-boomer-hugging shenanigans of the past few weeks, I haven’t heard either leader talk about this issue directly.
So I contacted Tony Abbott and Julia Gillard (well, their offices) and asked them to give the old sauce bottle a shake on the subject. In particular, I was interested in finding out their personal situations - how much did they pay for their first home, and do they have a mortgage now?
They jumped at the chance - and appointed their best spin doctors to explain their positions.
If this is the most important issue to you, take a moment to read each party’s position. Then I’ll have my turn (spin-free).
He says
TONY’S first home was in St Peters, in Sydney’s inner west, and cost him $135,000. He and his wife Margie have since traded up to better digs, and now have a mortgage over their current home in Forestville (although he’s got his eye on some property in Canberra).
The Coalition is yet to announce a formal policy on housing, but here’s their take on this issue:
“A Coalition government would deal with the causes of housing unaffordability rather than just the symptoms of it.
“Labor has spent $20 billion on housing programs, but all the statistics show that we’re still going backwards. House prices are up 19 per cent and rents are sky-high.
“We would stop the waste and the reckless spending that puts enormous pressure on interest rates because we understand how difficult it is to deal with the enormous cost of living pressures that have risen considerably under Labor.
“The Coalition will also ensure that people get their say on what happens in their local community. We’ve seen Labor bypass local council and community consultation to rush out poorly planned and unacceptable dwellings, something that should never be allowed to happen again.”
She says
JULIA’S house is typical Altona, the suburb in Melbourne where she’s lived since 1998 - ‘70s, brick veneer, two-and-a-half bedrooms. She bought it for $140,000 and her office tells me she still has a mortgage.
Here’s what her mob had to say about the issue:
“Despite the success of our national economy, federal Labor understands that many Australians are finding it hard to save a deposit for their first home.
“That’s why the Government established First Home Saver Accounts, and these accounts just got even more attractive - with the Government’s direct contribution increasing from a maximum of $850 per year to $935 per year.
“The Government also understands the social and economic consequences of a lack of supply of affordable housing. The Government’s aim in housing has been to increase supply, specifically the number of homes in the market that working families can afford to purchase and rent.
“The First Home Owner Boost helped more than 250,000 households buy their first home.
“The Housing Affordability Fund will support 76 projects across Australia that will reduce the cost of 14,500 new homes by an average of $18,000 and reduce the cost of a further 380,000 through local planning reforms.
“The housing supply problem has been growing for many years in Australia. It was left in the too-hard basket by the Coalition government and was made worse by reduced access to finance during the global recession.
“The Coalition government’s record was no housing minister, $3.1 billion worth of cuts to public housing, no housing programs and no reforms.”
Barefoot says
I WENT to both leaders this week because housing affordability is an issue that many people are clearly worried about. Frankly, the answers I received from both parties didn’t set my world on fire.
The reality is that housing affordability is a complex problem.
The Federal Government plays its part by meddling in the market and distorting prices (both in terms of grants and negative gearing). State governments are also to blame for their inability to release enough affordable land - and when they do they wrap it in so much red tape that it adds thousands of dollars to each lot.
Yet the biggest factor in driving house prices to historically high levels is our collective comfort in borrowing ever-larger amounts of dough.
And that’s precisely where Aussie households are most vulnerable. So it was no surprise this week when the Reserve Bank kept rates on hold that both leaders jockeyed to take credit for the decision.
But whoever ends up winning the election may likely face the problem of banks increasing rates independently of the Reserve Bank, as we saw at the start of the global financial crisis.
Fifteen years ago most banks had the “3-6-3 rule” - pay savers 3 per cent interest, lend it out to borrowers at 6 per cent, and be on the golf course by 3pm.
Today, our increasing desire for debt has meant that banks have to go overseas to borrow money, and the interest rates that foreigners are demanding are increasing in line with the continuing GFC.
Politicians like to give the impression they have the answers to all our ills, especially in the last few weeks of an election campaign. But the fact is these issues are being played out thousands of kilometres away from the Lodge - on the world debt markets - and there ain’t a lot they can do about it.
That should be a concern to all of us - especially Tony and Julia. After all, one of them might well be unemployed in a couple of weeks, and they’ve both got mortgages to meet.
Tread your own path!
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Scott Pape
Scott is a syndicated columnist, bestselling author, radio host, television presenter, and owner of a car that doesn't need to be locked. He is a licensed financial advisor, and director of Barefoot Investment Management (AFSL) 302081.
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All good points Scott, again. The silence has been deafening on this issue from both leaders, let alone the incompetent housing minister. They have vested interests. Did Julia Gillard mention she scored a job for her partner selling apartments to foreigners? Well she did and just happened to relax foreign investment rules shortly after (google it). In some countries they call it corruption. And Tony, well if he’s carrying a $700K mortgage these days the last thing he wants to see is a softening of the market - negative equity at age 52 would not be pleasant!
Sat 07 Aug 10 (10:01am)
Mon 16 Aug 10 (01:55pm)
It’s where you have a loan greater than the value of the asset.
An all to common phenomenon in the US and UK and one that could well happen in Australia if we have a dramatic fall in residential property prices.
Negative equity, what’s that?!
Scott Pape
Sun 08 Aug 10 (10:21pm)
We are in a global economy and the global economy.. I have yet to make up my mind on which party I shall vote for.. I, however, have made up my mind on which parties I am not voting for. Labor and Greens. The ETS is my biggest fear to the health of the Australian economy into the future. As for the housing affordability..yes it is a complex problem. The US is heading for a double dip recession, Europe is flat lining at best and there is a very real chance of a reduction in the “boom” in China. Australia will not go unscathed from these events and housing will become more affordable I believe. Either from direct deflation of prices or a long period of zero growth or a combination of both.. The average Melbourne home is around 7.5/8 times average earnings now. This is not sustainable and zero growth over a number of years and/or deflationary effects will see that multiple of earnings required come down. All the QE (Quantitive Easing aka Money Printing) in the US of A will lead to higher inflation at some point.. medium term is my guess 2 to 5 years and Australia will be seeing much higher interest rates on their mortgages. Nearer term cost of borrowing pressure from Europe will force the banks to raise rates outside of RBA moves. If I was buying a house now I would be factoring interest rates of around 13% within 5 years. I also would consider a home purchase as “shelter” and “my own place” rather than an ATM by using any equity gains to fund my lifestyle. Not sure who will win the election, I am fairly sure whoever gets in won’t win the one after. I am expecting the next wave of economic turmoil to hit our shores while this “winner” is on watch.. The voting public will punish the “winner” next round.
Still calling the ASX to drop below 3000 and the DOW 5000ish and Gold $2400USD/Oz before this ends.
Happy trails.
Sat 07 Aug 10 (10:29am)
“The housing supply problem” this stuff makes me want to smash my head against a wall - listings are continuing to increase, where is the lack of supply? i recall the california building industry talking lack of supply in 2006, funny how that ended up. agents have been talking the same crap in vancouver - now heading off the cliff - like the rest of canada.
governments parroting RE propaganda doesn’t do anything to help the problem.
on the fact of no housing minister, i’d rather have no minister than the efforts of tanya plibersek. she was attacking the rodent government before the 2007 election for the first home buyers grant - specifically because it pushed up prices. then it’s doubled under her watch and she defends it.
you should actually be proud of yourself, scott. you are the only person who i’ve ever seen put a hard question to tanya plibersek. all too often she gets away with her sweet librarian routine and is never held to account.
she was on the supposed hard hitting MTR yesterday with andrew bolt and steve price. it sounded like catch up chat in a coffee shop, not one question regarding housing.
Sat 07 Aug 10 (11:54am)
It is a shame this has not become a significant political issue in the election campaign. Neither side has the solution to the problem. There are several solutions such as ending negative gearing on existing houses but the parties seem reluctant to pursue them. Anyway the affordability issue could sort itself out like in the USA if the property bubble bursts.
Sat 07 Aug 10 (01:33pm)
The amount of homeless people driven onto the streets in 30 years time will be huge! It is bad enough now.. Maybe they should think about that now!
Sat 07 Aug 10 (02:00pm)
Thanks for sharing this information with us Scott.
I was about to start a FHSA, but since we’re in an election, would your advice be to hold off until afterwards?
Sat 07 Aug 10 (08:43pm)
Wed 11 Aug 10 (02:46pm)
House debt is the cheapest debt you can get. Far better uses for the money (for people with disposable income) than paying down a mortgage.
Only reason to pay down a mortgage is if you are very risk averse; or have a low, fixed income.
Nice work Scott. How is it possible that Julia still has a mortgage on her salary and paying only $140k in the first place. If she is that financially inept no wonder the country is in such a bad state!
Sat 07 Aug 10 (10:16pm)
Wed 11 Aug 10 (06:00pm)
Maybe because she also has an apartment in Canberra? (A place that she actually lives in!)
What ever!
Sun 08 Aug 10 (02:10pm)
Was disappointed with both parties outlines of housing affordability policy, especially Tony Abbott. It is common knowledge that the cost of housing is one of the greatest issues Australians face in the current climate, and yet other, less important topics seem to dominate the electoral debate (I won’t mention boat people or climate change)…
Sun 08 Aug 10 (05:23pm)
The coalition hasn’t yet got a policy on housing - which is strange after so many years in opposition.
Scott Pape
Sun 08 Aug 10 (11:45pm)
Mate you should be asking whether Saving & Investment should be part of the national curriculum - and what they are doing to educate people living week to week, off a credit card, how to buy a house etc etc
Sun 08 Aug 10 (07:30pm)
Sun 08 Aug 10 (07:39pm)
great comment Chris, we budget and have no credit card, and are now teaching our kids the same. We had a money coach after we lost our home and its been the best decision we have ever made. Delayed gratification is the best thing ever, but how can the government teach our kids that when they just gave money out for people to flush down the toilet and put us in debt when we were not in debt before?
Housing affordability is a serious issue weighing on the minds of many voters.. Personally not concerned with JG and TA’s first homes but very much interested in their ideas and policies about the housing affordability issue.
Sun 08 Aug 10 (07:34pm)
That’s the problem - there was a lot of spin, not much substance.
Scott Pape
Sun 08 Aug 10 (11:47pm)
what about those, like myself, who had bought a home and then sold up to concentrate on making sure your wife and 3 kids had good jobs and better education and in some cases access to specialist doctors/ treatments....3 years after selling ...our first home, which we renovated, i have more money in the bank than what we did with our first house, however, we cant get a loan or afford repayments on another house. Back to renting again....Regrets?? Sometimes...but at least I have money to invest in my families well being… What’s more important?
Sun 08 Aug 10 (07:42pm)
Sun 08 Aug 10 (08:31pm)
well said aaron but dont you think it would be nice for people like all of us that work hard to get a bit of reward and incentive from the government, it seems you work less you get more from them? or do i see this incorrectly
If we can get taxed on our personal savings, why isn’t the interest on our personal debts (mortgage or otherwise) tax deductible?
Sun 08 Aug 10 (07:43pm)
If we can get taxed on our personal savings, why isn’t the interest on our personal debts (mortgage or otherwise) tax deductible?
Sun 08 Aug 10 (07:58pm)
If the $1000PA from the government given towards the FHSA will mean the difference between you buying a home and not. Then you shouldn’t be buying in the first place.
Yes every $1000 makes a difference, but the government needs to do something other than throw money at FH buyers… Like bring the actual cost of housing down.
The only thing a FHSA account is good for is locking your money away.
Sun 08 Aug 10 (08:23pm)
Yes you have asked them about their home. What other property investments do they have that may be keeping other people in the rental market???
Mon 09 Aug 10 (12:51am)
I loved the 3-6-3 theory
Mon 09 Aug 10 (11:06am)
Chris, I have kids in gr 3 & 5 and both are doing things in relation to money, business and banks and they have even been talking about credit unions, which I was very pleased about.
The biggest problem is parents do not know how to say “NO...” to kids and put themselves into so much personal debt how are kids supposed to learn from that as they are the role models. None of my kids have a mobile phone, but they want one because their friends have them.
Mon 09 Aug 10 (11:07am)
when the goverment introduces a serious capital gain tax on investment properties, then we will know they are taking a serious approach. At least 60% tax is need to stop the so called investors from sitting on heaps on houses waiting for them to go up.....probably like scott pape
Mon 09 Aug 10 (12:04pm)
Wed 11 Aug 10 (02:51pm)
As the owner of more than 1 investment property, I can tell you the loss I will take on capital gains if I sell is what stops me from selling.
I’m far better off having it sit as a stream of income than disposing of it, and having all that taxable income in one year. I’d take a bath if I was to sell.
In the first few years of owning each house, each house was making a revenue loss (commonly referred to as negatively geared). Given that I financed these losses out of post-tax income, why should I get taxed again when disposing of the asset?
Julia has not managed to pay off a mortgage of less than $140k in 12 years despite earning a very high income for that whole period (she was a partner in a law firm before entering politics), having no financial dependents and having a lot of her work expenses met.
Assuming a 20% deposit she would only have to have paid $257.93 a week at 6.45%. Assuming she borrowed the whole lot $322.41.
Either her office is lying or she is completely and utterly financially inept.
Mon 16 Aug 10 (02:02pm)
Sat 25 Sep 10 (03:43pm)
I’d say both!