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Forum: Australian Bubble Forum

Forums->Australian Bubble Forum->The real cost of the FHBG

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hojusaram

The real cost of the FHBG

I noted this article today

http://www.calculatedriskblog.com/2010/03/very-expensive-home-buyer-tax-credit.html external link

about the US tax credit for housing.

"This is no surprise and suggests that the extension and expansion of the home buyer tax credit will probably cost taxpayers over $100,000 for each additional home sold."

I wonder if anyone has any stats on the true cost to "You and me" and all the other people out there who either can't afford a home or choose not to buy one.

How much did I pay in taxes for someone elses house ?? And what govt services won't I and many other be receiving because of this debt that was taken on my behalf that I see no value for ?

Obviously depending on your feelings of the FHBG ( and boost ) you would see a different cost/benefit. I personally think that the true cost will not be known for some time as I feel the FHBG boost is the trigger for the collapse of the whole pryramid, and that in the long run will cost many people a huge amount of money.

on: Fri 05 of Mar, 2010 [05:30 UTC]

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aardvark

Re: The real cost of the FHBG to the milch cows

on: Fri 05 of Mar, 2010 [11:19 UTC]

How much did I pay in taxes for someone elses house ??
And what govt services won't I and many other be receiving because of this debt that was taken on my behalf that I see no value for ?

Good questions hojusaram,

We all pay extra taxes to subsidize the broader economy due to the govt supported Ponzi (mainly in tax relief for loan interest deduction to investors).
But it is really recent and future home buyers who are paying and will pay the penalty with heavy debt burden.

Here is a quick calculation (rubbery figures) of extra debt generated by FHB Grant, maybe someone can do more accurate version.
Included FHB3 to show the trend of savings plus Grant.

Assume very simple transaction (ignore costs such as legals, stamp duty, etc):

Loan interest = 5%, Loan to Value ratio = 95%, 20 year loan.

FHB1 - $15k savings but no govt subsidy > $300k home, $15k interest yr1, 20yr int = $$250k;
FHB2 - no savings but FHBGrant of $21k > $420k home, $21k interest yr1, 20yr int = $315k;
FHB3 - $15k deposit + FHBG of $21k > $620k home, $31k interest yr1, 20yr int = $465k.

Whichever way one looks at it, adding a grant allows FHB to go into extra debt.
For investors, it is a walk in the park to match FHB anytime they wish thanks to generous tax deductions.
Easy to see why govt wants to subsidize homes - they get to skim bank profits, stamp duties, etc.
For the banks it is more debt, more interest – why would they want it any other way?
Dysfunctional systems eventually fail.

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erutangis

Re: The real cost of the FHBG

on: Fri 05 of Mar, 2010 [23:52 UTC]

Maybe I'm too gloomy, but I reckon that soon enough our invincible aussie big 4 will be on government support and we will all end up owning this problem. :(

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