MORGAN STANLEY: The benefits from the budget's super savers scheme are 'marginal'


Last week’s budget measure to help new home buyers save for their their first home is unlikely to have much effect on the market, Morgan Stanley (MS) says.

Business Insider looked at how First Home Super Savers Scheme (FHSSS) works last week.

Despite being convoluted, the FHSSS provides a tax break to people saving up to $30,000 for their first home.

It allows them to make extra contributions to their super fund, taxed at a concessional rate, and the extra after-tax savings can then be withdrawn early and go towards a house deposit.

Although Morgan Stanley analysts see some benefits to the scheme, they said that the overall impact is marginal.

In a best-case scenario, they calculated a couple could gain approximately $25,000 ($12,500 each) from the scheme, which amounts to 4% of the median house price.

That’s assuming they both contributed the maximum $30,000 allowed each toward the FHSSS within two years. The extra deposit would then be available from July 2019.

That example is optimistic, because even Treasury isn’t expecting the measure to have much of an effect.

“Given expected takeup, Treasury estimate a fiscal cost of $70 million per annum, equating to just 0.02% of the $300 billion in annual housing turnover,” Morgan Stanley said.

MS also highlighted infrastructure spending as another budget initiative that could benefit the housing market “taking the pressure off middle-ring valuations in Sydney and Melbourne over the medium-long run”.

Those benefits would be off-set against the fallout from the new bank levy.

“While the market will debate whether or not the surprise Bank Levy will be passed through to borrowers, we see the uncertainty as a negative for home-buyers,” the bank said.

MS said that the levy raised the risk of costs being passed onto customers, and estimated that an extra 20 basis points would have to be added to home loan rates to recoup the banks’ losses.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at