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Don’t expect the housing situation to get better any time soon. We have massive demand – fuelled by record population growth. We have low supply.
The latest figures show that housing approvals have fallen to a decade low. The number of loans to build or buy a new home have crashed to record lows. Construction companies are going broke practically daily.
I don’t see any genuine solutions being tabled.
In fact, the only thing our politicians seem capable of doing is spruiking pie-in-the-sky housing targets… that I suspect even they know we’ll never meet.
What we need are practical solutions.
Reducing immigration to 100,000 people a year (instead of 500,000 a year) should be step one. But I think we keep international students. They are a huge export for us in the education area. This is obvious.
Reduce demand overall, rents go down. It’s as simple as that.
But that doesn’t help mortgage holders. They still have massive mortgages.
They’re now paying off their mortgages at much higher interest rates. As a result, they’ve shut their wallets. And this is hurting the hundreds of thousands of businesses that rely on them to spend.
So here’s a proposal: make interest payments on mortgages tax deductible.
Hear me out.
Let’s say you owe $500,000 on your mortgage. Let’s also say your interest rate is 7.0 per cent. That means each month you’d be paying just over $2900 in interest alone.
Now imagine you’re in the United States.
Over there, this $2900 monthly interest payment would be tax deductible.
Yes, you read that correctly.
On the other side of the Pacific Ocean, mortgage holders get a “home mortgage interest deduction” that allows them to deduct interest paid on up to US$750,000 of their home loan principal.
The deduction only applies to home loans on a primary place of residence. Fair enough.
So why don’t Australians get the same benefit?
If it’s good enough for the Americans, surely it’s good enough for us too?
The PM could pass legislation on this next week.
Sure, you’d have the boffins at Treasury lose their minds over this proposal.
They’d say the tax offset would take too much money out of Canberra’s coffers.
But I’d rather the money be in the hands of mortgage holders who can spend it at local businesses, invest it in good companies and save for a rainy day … instead of having it in under the control of Canberra-based politicians and bureaucrats.
Do you agree?