‘Insulting’: Barefoot Investor unleashes as Albo drops bomb on housing market

The Australian housing market will undergo a dramatic upheaval starting today - and Barefoot Investor Scott Pape has huge concerns.

Barefoot Investor Scott Pape has launched a scathing takedown of Labor’s five per cent deposit scheme, branding it an “insult” to first home buyers.

The program available from Wednesday will mean the government guarantees up to 15 per cent of a home buyer’s loan value, eliminating the need for lenders mortgage insurance.

It is an extension of an existing scheme and will cover all Australian first home buyers, with no income caps or limits of the number of places available.

Mr Pape, author of perennial bestseller The Barefoot Investor, warned the policy risked first home buyers taking on 95 per cent mortgages and becoming “postcode povvos” vulnerable to interest rate hikes.

“It’s dressed up as a helping hand, but it’s really just a shove into bigger debt,” he said. “Instead of making homes more affordable, it will push prices higher and encourage first home buyers to borrow more and save less. That’s subprime lending, Australian-style.”

Barefoot Investor Scott Pape warned the policy risked first home buyers taking on 95 per cent mortgages and becoming “postcode povvos”. Picture: Jason Edwards

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In response to critics, Housing Minister Clare O’Neil has repeatedly said the scheme’s effect on house prices will be mild, based on a Treasury forecast.

“Treasury advice indicates the impact on house prices will be very minor - around 0.5 per cent over six years,” Ms O’Neil told news.com.au.

Mr Pape wasn’t buying it, however, insisting that the “Treasury’s forecasts are almost always wrong”.

He said when interest rates eventually increased, many Aussies who buy a home under the scheme “will hit the wall with a double dose of rising repayments and negative equity, and it’s taxpayers who will be on the hook to bail them out”.

He believed the program was actually designed to drive home values up.

“Two-thirds of voters own a home, most want prices to go up, and plenty of MPs on both sides own more than one property.

“Albo’s done the maths, and he’s making sure his roof at the Lodge stays secure.

“That’s what really stinks. It’s not just a dud policy, it’s insulting. It tells first home buyers they’re being helped, when in reality they’re being pushed further away from owning a home.”

The Albanese government maintains the scheme will only increase house prices by 0.5 per cent over six years. Picture: NewsWire / Martin Ollman

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Economists have widely condemned the expansion of the scheme since it was announced earlier this year.

AMP chief economist Shane Oliver said on Tuesday he was “not a great fan” of the program.

“It has the effect of putting more upwards pressure on already unaffordable housing - it just makes the situation worse,” Mr Oliver told news.com.au.

“I think there is a role for assistance for first home buyers but I’d reserve that for an economic downturn.

“There’s a case for it if you want to reinvigorate the property market, but that’s not the situation now. This is not the time for it.

“It seems like a good deal but the reality is that it will show up in higher prices. I think it’s one of the reasons we’re already seeing an acceleration in house prices this year.”

Mr Oliver said while some first home buyers might benefit, he expected the scheme would make it more challenging to get on the property ladder in the long run.

“If you’re one of the first to get in, good - but I suspect prices have already moved in anticipation of it anyway.”

AMP chief economist Shane Oliver said the scheme would only make Australia’s housing crisis worse.

Deyon mortgage broker and former RBA economist Martin Eftimoski also thought the scheme would have a “very stimulatory effect” on the housing market.

“This is smack bang in the middle of spring, which is the most intense buying season all year round. Launching this policy now is like pouring gasoline on a fire,” Mr Eftimoski said previously.

Shadow Housing Minister Andrew Bragg said the program would “dump a $60 billion liability onto taxpayers and push house prices up by as much as 10 per cent”.

“Labor is expanding the scheme without any plan to increase supply. More buyers and fewer homes will only mean higher prices,” Mr Bragg said.

“The children of billionaires will now be able to access taxpayer support to buy their first home. There will be higher taxes to pay for Labor’s largesse.

“The Coalition designed the scheme as a targeted policy to help Australians clear the deposit hurdle. Labor has turned it into a free-for-all.”

Falling approvals a ‘flashing red light’

The key to improving housing affordability, economists like Mr Oliver argue, is addressing a the imbalance between supply and demand.

But new data from the Australian Bureau of Statistics (ABS) showed building approvals fell 6 per cent in August.

The figure was driven by a 10.6 per cent drop in approvals for apartments and townhouses, while approvals for detached houses fell 2.9 per cent.

“This trend is deeply concerning because approvals are the pipeline for tomorrow’s housing supply,” said Master Builders Australia chief economist Shane Garrett.

The organisation’s chief executive, Denita Wawn, said there was a “clear gap between policy ambition and reality, with approvals going backwards, not forwards”.

“Approvals heading backwards are a flashing red light - unless the Government acts now to fix the pipeline, Australia’s housing crisis will only get worse,” Ms Wawn said.