Sydney property prices grow 19%: should Aussies salary-sacrifice to buy in?

Friday 31 March 2017

Article by Kelly Emmerton

House prices in the Sydney and Melbourne property markets continued to swell in March, according to CoreLogic data, and now the idea of a superannuation-like scheme to help first home buyers save up a deposit may become a reality.

Sydney property prices grow 19%: should Aussies salary-sacrifice to buy in?

Preliminary figures show prices in Sydney have grown 19% over the past year in the first 28 days of March, reported the Australian Financial Review - a 0.6% increase from the data released in February. In Melbourne March growth was 16%, up 2.9% from February’s figures.

"The early results come after a strong rebound in housing market conditions through the latter half of 2016 and into 2017," said Tim Lawless, CoreLogic head of research Asia Pacific.

"The strong capital gain results are further evidenced by a continuation in low stock levels, high auction clearance rates and strong investment demand."

The strong growth in Sydney and Melbourne has offset much weaker growth in other markets, resulting in an overall price growth rate in Australia’s capital cities of 1.4%.

House prices seem to be continuing their upward climb, despite a spate of lenders increasing home loan rates for both owner-occupiers and investors. Most recently, ME announced 0.25% increases to investment loans for both new and existing borrowers.

Add to those increased borrowing costs the other major property buying expenses such as stamp duty, lender’s mortgage insurance, building inspections and application fees, and it’s no wonder home ownership seems like a distant dream to many Aussies.

The salary-sacrifice proposal

One solution to prohibitively high housing prices, presented by First Home Buyers Australia, is a scheme similar to superannuation, where property hopefuls will be able to salary-sacrifice in order to save up for their first home.

“We believe we can incorporate superannuation-like features and have some tax benefits there for first home buyers so they are incentivised to put money into the account and they are incentivised to save more money,” FHBA co-founder Taj Singh told news.com.au.

RELATED: See the full list of lenders hiking home loan rates in March

“One of the things is the ability to allow first homebuyers to salary sacrifice their pre-tax wages, like they can do with super, into their account. Then tax those contributions at the same rate as super, which is 15 per cent. It essentially acts like a superannuation account.”

William Bourke, president of Sustainable Australia said the idea would be included in its “multi-policy approach” to housing affordability, so we may see it become reality in the future.

Until then, those hoping to get into a competitive property market need to search for ways to save on their property purchase, such as finding the lowest home loan rate on the market. Head over to our mortgage comparison tool to find the best deals around.

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