UPDATE: Labor’s major expansion to the home guarantee scheme, aimed at first-time buyers, is set to take effect from October 2023. Experts warn that this move could significantly push property prices higher, intensifying competition in an already strained housing market.
The revamped scheme will eliminate the previous cap of 50,000 first-home buyers, allowing an unlimited number of eligible buyers to access a deposit as low as 5%. This policy is designed to reduce the financial burden of lender’s mortgage insurance, potentially shortening the time needed to save for a home deposit. The government provides a taxpayer-backed guarantee of up to 15% of the home loan value, which could lead to increased demand and, consequently, rising prices.
Clare O’Neil, the housing minister, announced these sweeping changes over the weekend, emphasizing the government’s commitment to making homeownership more accessible. However, industry experts express serious concerns about the implications of this expansion.
Cameron Kusher, an independent property expert, stated, “This expansion is only going to drive prices higher and increase competition for the housing stock.” Kusher finds it difficult to accept the Treasury’s analysis that this policy will only result in a 0.5% increase in home prices over the next six years. He noted that past policies aimed at boosting demand, combined with falling interest rates, have historically led to significant price surges.
In a critical assessment, Brendan Coates, director of the Grattan Institute’s housing and economic security program, questioned the effectiveness of the new eligibility rules. “Support is being offered to those who don’t need it, likely pushing prices up,” he noted, highlighting that many of those struggling to buy homes are already eligible. Coates further asserted, “This is just another in a long line of policies that sound good but may worsen the housing affordability crisis.”
Adding to the debate, Peter Tulip, chief economist at the Centre for Independent Studies, expressed concerns about the lack of comprehensive studies on the impact of first-home buyer support schemes on property values. He cautioned that the government’s proposal could lead to riskier borrowing behavior, stating, “This is likely to encourage reckless borrowing and bidding, making bubbles more likely.”
The backdrop to this policy shift is the urgent housing crisis facing Australia. The National Housing Supply and Affordability Council has indicated that the government is projected to fall short by 262,000 homes in meeting its ambitious target of building 1.2 million homes by 2029. Despite these challenges, Prime Minister Anthony Albanese remains determined, asserting, “If you don’t have a target, you’re not trying.”
As the new policies roll out, stakeholders from various sectors are closely monitoring the market’s response. The immediate future holds uncertainty for both prospective homeowners and those tracking the housing market’s trajectory. With prices expected to react swiftly to the influx of buyers, many are left wondering if this policy change will truly alleviate the challenges faced by first-time buyers or exacerbate the ongoing affordability crisis.
Stay tuned for further updates as this situation develops, and watch for the potential impacts on the housing market in the coming months.
