Call to lift first-home loan threshold

Scott Morrison is considering expanding his signature election policy that covers the cost of mortgage insurance for first-home buyers.

House prices could rise by almost 20 per cent this year.

Scott Morrison is considering expanding his signature election policy that covers the cost of mortgage insurance for first-home buyers as record numbers enter the market and bank chiefs predict prices could rise by as much as 17 per cent this year.

The Weekend Australian can reveal the government is assessing advice by the National Housing Finance and Investment Corporation on lifting the thresholds for the first home loan deposit scheme.

The Prime Minister introduced it at the launch of his 2019 election campaign but industry associations have been privately lobbying the government to raise the eligibility thresholds from $700,000 in Sydney, $600,000 in Melbourne, $475,000 in Brisbane, $500,000 in Canberra, $375,000 in Darwin and $400,000 in Perth and Hobart.

National Australia Bank chief executive Ross McEwan told a parliamentary committee on Friday that 16 per cent of NAB mortgages were going to first-home buyers compared with 4 per cent in 2016.

First-home owners made up less than 11 per cent of new home loans at NAB in the first quarter of last year.

Mr McEwan warned the committee state governments had to free up land and streamline property approvals to address the supply issues heating up the nation’s property market.

“I strongly support first-homebuyer incentives, but we know supply is restricted and the states need to streamline approval processes for land development and residential construction,” he said.

“Without decisive moves to increase housing supply, demand-side incentives will inevitably act to push up house prices further and faster.”

His comments echo those of Westpac chief executive Peter King, who has highlighted supply problems in the housing market that are exacerbating price growth.

Mr McEwan said house prices might rise “in excess” of 10 per cent this year, a marked change to the 8 per cent to 10 per cent decline the bank was estimating as COVID-19 started to dent economic activity early last year.

ANZ expects house prices will surge 17 per cent this year, but chief executive Shayne Elliott said the current market dynamics were not “cause for alarm”.

Prices in Melbourne were back to where they were a year ago and in Sydney they had risen to levels seen three years earlier, Mr Elliott said. “We agree that price increases need to be watched and credit standards maintained to ensure the financial system remains stable,” he said.

The NHFIC, which manages the home loans scheme for up to 10,000 buyers each year, has confirmed that it had recently given advice to Housing Minister Michael Sukkar over the application of the scheme but refused to comment on specific details.

House prices have soared since the end of last year. In the first three months of this year, prices have climbed 5.8 per cent nationally, creating record highs in six of the eight capitals. Sydney prices have climbed 6.7 per cent last quarter and caused house medians to surpass $1m, while Melbourne rose 4.9 per cent. The biggest capital city rise was in Hobart (7.6 per cent) where the scheme’s price cap is $400,000.

Federal Liberal MPs backed the NAB boss’s call to governments to do more to improve access to the market.

Liberal MP Jason Falinski warned the lack of housing supply had become a “moral issue”.

“The federal government has moral sway … house prices have become a moral issue for young Australians who cannot access the Australian dream,” he told The Weekend Australian.

“When we bailed out the Tasmanians’ housing commission, we tied that funding to reform of the state’s approach to housing. We are in dangerous territory with state governments who love collecting stamp duty and local councils who try to win elections by saying ‘we promise no houses will be built on your street’, not freeing up land, for their self-interest.”

Mr Sukkar said the government was doing what it could to improve supply, and that the number of first-home owners was at record highs thanks to programs such as the first home loan deposit scheme.

“So while the commonwealth has limited power to impact supply we are doing our bit, including releasing suitable commonwealth land (eg former defence land) for housing development,” he said.

“Importantly, the commonwealth with the states and territories are already progressing a National Population and Planning Framework. This framework is the first of its kind in Australia and represents another important step in ensuring all levels of government come together to better plan for Australia’s future population and housing needs.”

Standing Committee on Economics chairman Tim Wilson said solving supply issues alone would not ease access into the housing market. He said changes to superannuation were necessary.

“Currently the system is rigged against first-home buyers where super funds are using members’ super to buy homes funds own, but young Aussies can’t use their super to compete and buy homes they own,” he said.