‘Petrol on a fire’: Ex-RBA expert’s dire house price warning
A former economist at the RBA has issued a warning for prospective homebuyers, saying prices re set to skyrocket in just months.
A former Reserve Bank economist has issued a warning for prospective home buyers, saying prices will soar when a new Government housing plan comes into effect in October.
On Monday, the government announced that the scheme, which allows a deposit of 5 per cent without needing to pay lenders’ mortgage insurance, had been brought forward to October. It was earlier promised to begin in January 2026 during the election.
The announcement generated so much interest that it crashed the Housing Australia website.
Though it will undoubtedly help many first home buyers onto the property ladder, economists have widely criticised the scheme, saying it will lead to increased demand and drive prices up.
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Among the critics is Deyon mortgage broker and former RBA economist Martin Eftimoski, who warns the policy will only add to the spring home buying rush.
“The timing of the announcement and the movement of the announcement in particular I think will have a very stimulatory effect on the market,” Mr Eftimoski told news.com.au.
“Australia shuts down before Australia Day – between Christmas and Australia Day nothing really happens, no one wants to move house, no one wants to buy a house.
“Launching it in January would be a whimper – doing it in October is a bang.
“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.”
In response to questions on Tuesday, Housing Minister Clare O’Neil said the scheme was part of a wider plan to build more homes and increase supply.
“Treasury advice indicates the impact on house prices will be very minor – around 0.5 per cent impact over six years,” Ms O’Neil told news.com.au.
“We’ve coupled this expansion with an ambitious program to build more homes, and make housing more affordable – including building 100,000 homes just for home buyers.”
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But Mr Eftimoski said he believed Treasury had underestimated the impact of the policy on prices.
“I think there will be a 0.5 per cent increase in six months,” he said.
“Treasury’s modelling probably has insufficiently considered the psychological dimensions of this policy. I suspect the advice that’s gone up to the minister is that this is no big deal.”
He also questioned the government decision to set property price caps for the scheme in line with average house prices in the buyer’s area.
It meant houses would quickly move out of reach again for first home buyers as prices kept going up, he said.
“Next financial year, what do you do – do you increase it? Because the median house price in Sydney isn’t going to be $1.5 million in June next year.
“This is more material than an RBA rate cut.”
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”.
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“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.”
