I have a team in the Philippines.
And last week they had to decide who they wanted their president to be in a General Election.
They had 2 choices.
If you are old enough to remember Ferdinand Marcos (Snr) you will know that as President of the Philippines he stole an estimated $10Bn from the Filipino people. They have a son also named Ferdinand and he was one of those up for election.
The other guy?
Well, he was the incumbent who did not like drugs. So much so that anyone (even if it was a rumour) connected to drugs were shot dead.
In other words, the choice was i) give power to someone who will steal from your or ii) someone who will shoot you dead. Not really what I would call policy driven decisions. It sounds ridiculous that it has came to this but it is true.
The country ultimately voted that giving money away rather than being shot was the best alternative.
It’s the same for our Australian election too. Our choices are:
- LNP – we looked after you before so we will do it again but not tell you what we are going to do but trust us or
- Labor – you gave us a bloody nose last time for telling you taxes will go up so we will tell you nothing in the hope you think we will not do any damage.
Except they both know housing is an issue so they want to help Australians buy a home. And they want to tell you their plan is the best.
Both plans are crap.
Here’s why.
Both plans work on the demand side. And there is nothing on the supply side. No plans on increasing the number of new houses. For that we need new bus routes, new train stations new infrastructure and builders. I love Koalas but at some stage a decision will have to be made if homes for our children are more important than that of a tree for the Koala. One of the reasons you cannot build in Brisbane anymore is because a koala was spotted in the area 4 months ago. Now I am not suggesting we rehouse them all but maybe some?
So, more people with more money fighting for less homes will make prices skyrocket in an already hot market.
But there is another reason why both ideas are bonkers
- Super Money for your Home
The NLP’s idea is that they will allow you to take 40% or a max of $50,000 from Super.
This is short term gain for possibly long-term gain.
You see money invested in the early years actually grow more than in the later years. So, if that money is then withdrawn you lose a crapload of compounding.
This in turn will do massive damage to retirement saving. And that means less in retirement – gaining short term at the loss of long term.
But your home will go up in value is what the NLP will say. Maybe. But in Super your investment will be diversified whereas in a home all your eggs are in one basket.
But the biggest issue I have is twofold:
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- The government keeps telling me and the SIS act specifically states that Superannuation is for the benefit of our retirement so that it should not benefit us during our working years.
This then is entirely opposite, and it is a slippery slope – once you start there will be more. What about using Super money to buy a business?
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- Governments think short term. Super is for long term. This plan is not long term. It was designed for getting votes.
And I wish Governments stop messing about with Super. It is the number one reason many of my clients do not invest more into Super. They simply do not trust the government. And I don’t blame them. I wouldn’t either
Helping people to buy their home using retirement monies is a stupid idea. This policy will result is more bids for the same number of homes.
- The Government Owns 40% of Your Home
Labor has its own plan. It says it will help you with a deposit in exchange for 40% of your home.
There are several reasons why I always think twice before jumping into bed with anyone. The first one relates to my wife who would not be best pleased but let’s assume I am talking in a financial sense.
The second one relates to trust. Do you trust the person you want to jump into your financial bed with?
Do you really trust a government to do the right thing by you, protect you with honour and integrity with no chance of changing the rules? See what I mean?
And what happens if we move into negative equity territory and the home must be sold at a loss. Do you and I take a financial haircut because Joe Bloggs did not pay the mortgage?
I also believe that the more help given to us the less we will save. If you only need a 2% deposit and rely on the state for the rest, why bother pinching for a full deposit?
Asking the government to jump into financial bed with you is also stupid.
Until there is a plan for the demand side and supply side of affordable housing any plan to reduce housing costs affordability will do nothing to solve the problem.
Don’t ask me who to vote for. I won’t tell you. Because both sides are not what the country wants or needs. But we must go into those election booths and vote for a party that has very few policies. And any policies they are willing to share a bit nutty and bonkers in the hope they win some votes.
So, our choice seems as ridiculous as the choice the Filipino’s had. We must choose between 2 crappy parties and hope we get the best alternative.
