News

The introduction of First Home Saver Accounts (FHSAs) is set to change the financial services industry, bringing with them a new, reformed Product Disclosure Statement (PDS) intended to be short, clear and concise – a giant step from many current superannuation PDS that are commonly over 100 pages.

As promised by the government, the new PDS could be as short as 4 pages, although it’s hard to believe how.  The First Home Saver PDS will be monitored before the idea spreads to the rest of the financial services industry.

First Home Saver accounts will be available from 1st October 2008, and are set to provide struggling savers with a better way to build a deposit for their first home.

FirstHomeSaver.com.au recently surveyed young Australians with an alarming 74% of respondents saying they believe housing affordability is set to get worse in the next 5 years. Those surveyed attribute the housing affordability crisis predominately to rising interest rates; however also felt that land supply constraints and poor Government policy had contributed to the problem.

While 69% of firsthomesaver.com.au survey respondents believed the Government was not doing enough to help first home buyers to tackle the affordability crisis, the introduction of First Home Saver Accounts from 1st October 2008 may change all that.

The Government recently passed the laws introducing First Home Saver Accounts, which feature tax concessions and Government contributions to help struggling first home savers reach the first critical hurdle - saving a big enough deposit to get into the market. Up to the first $5,000 in savings each year will attract a 17% contribution from the Government, and earnings will be taxed at just 15%.

In its Social Trends 2008 Report released today, the ABS highlights the struggle facing first home buyers. The real cost of first homes almost doubled from $165,000 to $310,000 in the ten years to 2005/06. Compounding this are recent interest rate rises that translated to an average interest bill on first homes of $20,100 per year in March 2008, while in 2003 the equivalent figure was just $12,400. At March 2008 first homes buyers needed to borrow an average of $215,000 to reach the first rung on the property ladder.

The Government is hoping this initiative will help address the housing affordability crisis, and early indications look promising with 76% of those polled on the firsthomesaver.com.au website being supportive of First Home Saver Accounts.

The number of Australians entering the mortgage market has dropped considerably, showing a massive 25% drop for the most part of this year so far.  It’s no surprise that ever-growing petrol prices and painful interest rates have turned off thousands of potential home owners from getting into the housing market, who are now forced to remain in an increasingly tighter rental market.

It’s feared by experts that the flow on effect from our slowing construction industry will be devastating for employment.

Craig James, chief equities economist at CommSec says "The situation is unsustainable. More homes will need to be built to house our growing population"

With a growing population and simultaneous housing shortage, Australia’s house prices are set to go through the roof, according to ANZ’s economists.  Yet given new apartment approvals fell 18.2%, those forced to stay in the rent trap are faced with a tighter and tighter squeeze.