On Sunday (13 April), the two main political parties unveiled new housing policies to help more first home buyers enter the property market.
In a move to address the housing affordability issue in Australia, Labor has pledged to remove income and place limits from the First Home Guarantee (allowing all first home buyers to purchase with a 5 per cent deposit and no Lenders Mortgage Insurance), alongside a $10 billion investment to build up to 100,000 homes for first home buyers.
Meanwhile, the Coalition has proposed a new tax deduction on mortgage interest for newly built homes, alongside increases to income and property price caps on its Home Guarantee Scheme.
While many have welcomed the new policies, concerns have been raised that some of the moves would only exacerbate demand - thereby further increasing property prices.
According to the Australian Greens, the Coalition’s tax deduction plan amounts to “a dangerous debt trap that could push house prices to skyrocket even further out of reach of renters and first homebuyers” suggesting that first home buyers would experience “a massive spike in their mortgage repayments” after the fifth year.
Greens Leader Adam Bandt MP said: “Under Labor’s plan your mortgage will still be huge and Peter Dutton will make it even bigger.”
Greens housing and homelessness spokesperson, Max Chandler-Mather MP, added: “With regards to the home guarantee, we’ve seen the show before, another first home buyer scheme promising the world, but all that happens is house prices and bank profits keep going up, while more and more people are locked out of home ownership forever.”
The Greens also suggested that, while they won’t “stand in the way of Labor’s policy”, they described it as “tinkering around the edges”, adding it “won’t be enough to stop house prices skyrocketing because of tax handouts to wealthy property investors”.
Bandt said: “The election housing battle lines are now clear. Labor tinkers while prices soar, the Liberals will send prices even higher, but the Greens will fix investor tax handouts and cap rents,” highlighting its pledge to scrap negative gearing and reform capital gains tax.
Economists have also voiced scepticism about some of the new policies’ efficacy.
The chief economist of Chartered Accountants ANZ, Professor Richard Holden, said both parties have “clear weaknesses” in their housing plans.
"The policies offered by both parties are much better politics than they are economics,” Professor Holden said.
"The Coalition's unprecedented mortgage interest tax deduction is costly to the budget, arbitrary in terms of who it helps, creates financial stability risks, and is hard to roll back.
"The Labor Party’s ‘five percent deposit' policy raises many questions. Since the government is essentially providing mortgage insurance for low-deposit purchasers, what is the true cost? What happens if a buyer defaults? How are commercial banks treating these loans? Much more detail needs to be provided.
He added: "Neither party has offered a policy which seriously boosts housing supply. They've provided more demand-side subsidies that tend to make housing affordability worse rather than better."
Instead, CA ANZ has suggested that there needs to be “meaningful discussion about the Australian taxation system”.
Property industry welcomes supply boost
However, many have applauded the measures to increase housing supply (including Labor’s pledge to invest $10 billion to build 100,000 homes and the Coalition’s pledge to invest $5 billion to support new builds by finding relevant infrastructure, such as water and roads).
The Housing Industry Association (HIA) backed Labor’s plans, in particular, with managing director, Jocelyn Martin stating that its moves would see “tens of thousands of additional homes commence construction each year (or “at least 30,000 new homes commence construction”), taking pressure of established house price growth by increasing the supply of new homes and at the same time, reducing demand for rental properties as first home buyers move to their new home”.
The Property Council of Australia also said Labor’s policy to invest $10 billion towards building 100,000 new homes for first homebuyers, matched by an expansion of the First Home Guarantee Scheme, would bring Australia closer to its 1.2 million new home target and help make new homes more affordable for first homebuyers.
Property Council CEO Mike Zorbas said: “This kind of generational investment is a game changer for new housing supply.
“100,000 new homes will be a big boost to our welcome and ambitious 1.2 million new homes target.”
He added that the Coalition’s moves were also a “shot in the arm” for housing targets.
“Many tens of thousands of new homes over five years alongside last mile infrastructure improvements are a shot in the arm for our national supply numbers,” he said.
However, Zorbas added: "Whoever forms government will need to apply additional direct incentives to boost state and local government supply and approval capacity, keeping the market in equilibrium, to build the homes the nation needs.”
