Ahh politics, with just one week to go before Australia casts it votes Scott Morrison has announced a scheme which he believes will help ease the housing crises. My typical disclaimer is that I am apolitical and this is article is comment on how I see this scheme playing out in real life.

The Policy

In summary what the $300k Baby Boomer aims to do is encourage older Australians to sell their larger homes ‘without penalty’ so that younger families and first home buyers can move in. Currently on of the issues we have is that if Baby Boomers are to sell their homes and downsize they will lose their pension. Whilst they may be better off to do this, the psychology of many Australians is that they have worked hard their whole lives and want their pensions and health care cards.

It is quite a common scenario that an older couple ay have purchase their home in the 1970’s for $50,000 and now that home is worth $1.5m. If you own a home, to qualify for a full pension a couple must not have assets above $405,000. Therefore if the couple in this example qualified for the full pension and then sold their home and downsized to a $1m property then by default they lose their pension (after one years grace).

What Scott Morrison is promising, is to extend the grace period to two years and allowing over 55’s to put $300,000 each the proceeds from sale into their super (currently you need to be over 65 to do this).

The Problem

Now here is where I see it falling over if there is a large uptake. With additional homes on the market prices will fall (supply and demand). Now this may be a good thing you could argue but as this is targeted at larger homes it still may be too big a jump for first home owners to afford the property. Therefore 2nd home buyers upgrade and put their smaller homes on the market. Given the downsizers are now downsizing it is almost a house swap situation where they are cashed up and can overpay to secure those types of homes. And yet again who misses out, yep the first home buyer…

In summary I feel this is how there are winners and losers if this policy was to go ahead and have a large uptake.

Pensioners

Wins – Superannuation benefits

Losses – Sell for less due to oversupply, pay more to downsize with undersupply, lose pension after 2 years anyway.

Second Home Buyers

Wins – Sell for more as higher demand, upgrade for less as more choice

Losses – None, they don’t have to participate

First Home Buyers

Wins – None, the home coming on the market are likely to be still out of reach for their budget

Losses – Have to compete with cashed up Baby Boomers making it even harder to get into the market