Doubts growing over ScoMo’s $500 million first home buyer scheme

Industry leaders are calling on the government to urgently clarify a range of issues with a recently announced housing package, saying they doubted the policy had been clearly thought through.

Prime Minister Scott Morrison’s first home buyer scheme has been criticised. Picture Kym Smith

Prime Minister Scott Morrison’s pledge to help first home buyers purchase homes with small deposits has attracted renewed criticism from industry leaders, who say it “makes no sense”.

The real estate figures are now calling on the Liberal leader to make urgent clarifications of how the policy will work.

Early details of the $500 million plan, which were released just prior to the federal election, included a government promise to allow 10,000 first home buyers to purchase with only a 5 per cent deposit.

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First home buyers with an income of up to $125,000 a year (or $200,000 for couples) will be eligible, but it is not clear how much the buyers would be able to spend.

The government has yet to confirm the value of homes eligible for the scheme.

Scant additional policy details have been released, apart from a government guarantee that first home buyers in the scheme would not have to foot hefty bills for mortgage lenders’ insurance.

Starr Partners chief executive Douglas Driscoll said the government needed to explain exactly who would be eligible for the plan as it was not clear who the 10,000 buyers to benefit would be.

Capping the policy at this number would mean plenty of first-time buyers would be left out of the scheme, even if they earned under the $125,000 a year requirement, Mr Driscoll said.

“Why just 10,000? And who gets it?” he said. “Limiting it to just this number seems bizarre. What happens to buyer number 10,001?

“This will need to be explained because right now it seems like Willy Wonka’s golden ticket. Do you just have to be lucky?”

He added that the policy had the air of a gimmick conceived at “the back of the campaign bus” merely to appeal to voters.

“It’s a desperate roll of the dice,” Mr Driscoll said. “It doesn’t seem like they thought this through. Getting young buyers into so much debt doesn’t seem like a good idea.

Gene Wilder as Willy Wonka and the Oompa Loompas from the film "Charlie and The Chocolate Factory".

“Labor committing to the same policy just hours after (the Liberals announced it) suggests they didn’t think it through either.”

Realestate.com.au chief economist Nerida Conisbee said first home buyer incentives had a history of pulling forward demand.

There was a danger the scheme would push up prices in certain bands of the market, she said.

Real Estate Institute of NSW president Tim McKibbin said the policy would be confusing for banks.

Bill Shorten confirmed Labor would mirror the first home buyer scheme if it won the election. Picture: Ryan Pierse/Getty Images

Government made a risky assumption believing banks would finance prospective purchasers if they have been unable to save a deposit above 5 per cent, he said.

“Banks are entitled to feel confused, considering it is less than six months since they were heavily criticised for their lending practices,” Mr McKibbin said.

“If the banks are not confident that prospective purchasers can service their debt, then acting responsibly, they will refuse to extend them a loan.”

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LJ Hooker head of research Matthew Tiller said the scheme was a “welcome measure” but questioned its true purpose.

“This policy and the timing of the announcement shows that housing policy has become an election gimmick, which is only rolled out during the later stages of a tight election campaign,” Mr Tiller said.

“What’s needed from the new government is the consideration, planning and implementation of a comprehensive, long-term housing solution that includes social and affordable housing, build-to-rent, taxation, construction and solutions for all market participants.”

Originally published as Doubts growing over ScoMo’s $500 million first home buyer scheme