Labor its changes to the first home buyers scheme will help more people “realise their dream of home ownership sooner”. However, it is not only no solution to the housing affordability crisis, it will likely make it worse.
The changes, which came into effect on October 1, allow first home buyers to take out a mortgage with a 5% deposit, down from 20%. The plan has no income cap, meaning first home buyers with higher incomes are eligible, raises the maximum price for eligible properties and covers the lender’s mortgage insurance, which ranges from 1%–5% of the borrowed amount.
The logic is that lowering the deposit for first home buyers will make it easier for them to enter the “property market”.
But, as even mainstream economists have pointed out, it will do little to boost home ownership rates while house prices skyrocket ever higher. The described the scheme as a “cruel illusion” that will lead to property prices rising by 7% this year alone.
The plan will bring more first home buyers into the market without adding housing supply and therefore will push up housing prices.
Labor’s plan does nothing to help renters, or new and existing homeowners with high mortgage repayments. But it does help investors and speculators by pushing up housing prices.
Almost 30% of mortgage holders, about 1.5 million people, are at risk of mortgage stress and this figure is . Those considered “extremely at risk” make up 19.7%.
federal shows that the vast majority of workers on the median income would be unable to afford mortgage repayments without falling into housing stress.
reported a nurse living in Sydney, earning an average income, would have to spend 76% of their pay on servicing their mortgage. Sales assistants, teachers, cleaners, carers, hospitality workers and countless others would face similar challenges.
reported in August that one would need a whopping $200,000 income to afford a typical house in most capital cities. The current median income is .
To compound matters, the Reserve Bank of Australia decided on September 30 not to cut interest rates, claiming it did not want to risk inflation.
Some first home buyers may end up defaulting on their mortgage because they were banking on another interest rate cut.
Labor is resisting the pressure to take concrete action on housing affordability. Housing minister Clare O’Neill Triple J Hack last December, the government was “not trying to bring down house prices … that may be the view of young people, [but] it’s not the view of our government.”
While home ownership rates are dropping, 12 million people owning property have a material interest in house prices continuing to rise.
As economist Saul Eslake said: “Even the dumbest of our politicians can do that math”.
He went on to argue that for 70 years housing has “come to be regarded” as a vehicle for accumulating wealth, not as something that meets basic human needs. This is a result of bipartisan support for giving generous subsidies to those owning more than one property, through negative gearing and capital gains tax exemptions.
Labor is feeling the pressure, as housing was a key issue in the federal election.
Fixing the housing crisis requires a major investment in public housing and scrapping capital gains and negative gearing. These are the measures required to make housing a right instead of a speculative investment. But Labor is not willing to do this.
Both Labor and Coalition insist that housing supply can be increased by cutting red tape and handing land and money over to developers. But this will not lower prices because developers can make more money building luxury homes for investors to speculate with.
Labor’s policies have only delivered for first home buyers, so it is happy to scapegoat others, including immigrants.
Data published by in August showed that population growth does little to impact house prices. Over the past 10 years, the number of new dwellings has significantly outpaced population growth. Yet, during that same period, house prices in some major cities have doubled.
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