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Keeping the dream of home ownership alive

Thursday, 15 May 2008

Young Australians are struggling to buy their first home with affordability at all time lows. The Government’s decision to introduce First Home Saver Accounts is a great initiative to help people build a bigger deposit for their first home than traditional savings accounts.

First Home Saver Accounts will attract bonus money from the Government and benefit from low tax rates, so for example a couple each earning average incomes and putting aside 10 per cent of their money into a First Home Saver Account, could save a deposit of more than $88,500 after five years of disciplined savings. This is up to $12,600 more than they would have saved otherwise.

First Home Saver accounts - A better way to save

The benefit of First Home Saver accounts over traditional savings accounts is;

The Government will pay a bonus contribution on the first $5,000 of individual contributions made each year, and individuals can contribute a maximum of $10,000 each year.
Investment earnings or interest that accrues in First Home Saver accounts will be taxed at a low 15 per cent.
Withdrawals will be tax free where they are used to purchase a first home to live in.

Housing Affordability Crisis

It’s no secret that for many Australians the dream of owning your own home is becoming a distant reality.

Despite our wide open spaces Australia has one of the least affordable housing markets in the world, with average housing prices now more than 7.5 times the average annual income. The cost of housing has jumped a whopping 400 per cent since the mid 1980s, but income levels have only increased 120 per cent since that time.

First home buyers are suffering the most, having the lowest average incomes, and having to pay the highest ever housing prices. With recent interest rate rises, and the cost of renting also sky rocketing, saving an adequate deposit for a home has become harder and harder. Only 1 in 20 Generation Y’s (15 – 29) currently own their own home.

First Home Saver accounts – helping achieve home ownership sooner

First Home saver accounts are set to help young Australians get into the housing market sooner, with a system that;

Rewards disciplined savings with Government bonuses
Encourages saving over a longer term
Maximises savings through low tax rates
Helps reduce inflationary pressures.

First Home Saver accounts are a new initiative, so we’d like to hear what you think. Are the incentives attractive? Is it a fair system? Will First Home Saver accounts be accessible to all? Click here to comment

The Nitty Gritty

First Home Saver accounts are so new they haven’t been launched yet (the Government is still finalising the rules). But like most financial products there’s always lots of details.
Check out How Does It Work?