Scott Morrison puts first homebuyers on government radar

IT TAKES eight years for a couple to save enough for a deposit for a home in Sydney, and it’s nearly as bad in Melbourne. But at last, there could be hope.

First homebuyers might get a look in if government plans to reduce red tape and release more land create more affordable housing. Picture: Cormac Hanrahan

THE Government today will take on its biggest economic challenge — putting housing within the reach of young people.

Sky-high prices in Sydney and Melbourne in particular mean it will take an average dual-income couple nearly eight years to save for a deposit for a home in the Harbour City. That’s assuming prices don’t rise in the meantime.

Treasurer Scott Morrison will use a speech to commit the Turnbull government to policies to make housing more affordable, particularly for first-time buyers.

Mr Morrison will tell the Urban Development Institute in a Sydney speech that the price of housing and the demands of mortgages are robbing Australians of their own places.

And while the biggest stumbling block many people face is saving a 20 per cent deposit (the amount needed to avoid mortgage insurance by most lenders), once people have a home, they are still struggling with repayments.

The share of median household income spent on mortgage payments has increased by more than half for 25-34 year olds between 1981 and 2011. It has more than doubled for 35-44 year olds, with each paying around 25 per cent or more of median household income on their mortgages.

The Government plans to help home buyers by working with the states and municipal councils to reduce the cost and red tape involved of developing housing, and to release more land.

It has yet to release a full policy agenda but Mr Morrison said action had to be taken soon.

“That is why housing affordability will be an important policy focus of the Turnbull Government in this parliamentary term. And it is important we get it right,” says the Morrison speech.

The Treasurer says capital city prices have grown far more rapidly than in the rest of the country with Sydney price growth greater than all the other capitals, followed closely by Melbourne.

Sydney and Melbourne prices rose around 65 per cent and 40 per cent respectively, since their early 2012 lows. While Sydney and Melbourne prices have grown by almost 10% in the past year, Perth and Darwin have fallen by up to seven per cent after very strong increases fuelled by the mining boom.

“All of this can seem very unfair. The market is getting away from people. No matter how hard they work or save or even earn, they are finding it harder and harder to get into the market,” the Treasurer will tell his audience.

“The real pinch point is for Australians being able to get into the housing market in the first place, which is affecting many would-be first home buyers.

“While low interest rates may make it easier to pay down a mortgage, they also make it harder to save to get one in the first place.

“As house prices have risen relative to incomes, this is making it more difficult for first home buyers to keep up and save an adequate deposit.”

The proportion of home loans going to first home buyers was 13.4 per cent in August 2016, the lowest point since February 2004 and well below its long-term average of 19.4 per cent.

Between June 2010 and June 2015, the time taken for a dual income couple to save for a 20 per cent deposit in Sydney increased from 5.8 years to 7.9 years. In Melbourne it increased from 5.3 years to 5.8 years.