Housing industry welcomes ALP scheme but risk if home values tumble

The housing industry welcomed Labor’s co-ownership housing scheme but economists warn of cost to taxpayers if home prices fall.

Anthony Albanese said a Labor government would provide eligible homebuyers with an equity contribution of up to 40 per cent of the purchase price of a new home and up to 30 per cent for an existing home. Picture: Mark Wilson

Labor’s co-ownership housing scheme could need a $17bn capital injection by taxpayers this decade, exposing Canberra’s finances to risk if home prices fall, which has happened once every four years over the past two decades.

But economists say the proposed plan’s impact on property values is likely to be modest given the small size of the program and tight targeting, with a high likelihood the return on investment will exceed loan repayments.

On Sunday, Anthony Albanese said a Labor government would provide eligible homebuyers with an equity contribution of up to 40 per cent of the purchase price of a new home and up to 30 per cent for an existing home.

The housing industry welcomed the policy, which includes a new body to set targets for land supply, in consultation with states and territories, and provide consistent data on housing supply, demand and affordability.

The Opposition Leader said the scheme “will assist Australians to buy a home with a smaller deposit, a smaller mortgage and smaller mortgage repayments”.

“I want to build a better future – and I want to help more Australians own a stake in it,” he said at his campaign launch in Perth.

Federal Opposition leader Anthony Albanese speaks during the Labor Party election campaign launch in Perth. Picture: Paul Kane/Getty Images

“Help to Buy is exactly what I mean when I talk about an economy that works for people, rather than people just working for an economy.”

The scheme would cover up to 10,000 loans a year and would be open to Australian citizens with a taxable income of up to $90,000 for individuals and up to $120,000 for couples. Homebuyers must not currently own or have an ­interest in a residential dwelling.

Buyers will need to have a 2 per cent deposit and qualify for a standard home loan with a participating lender to finance the remainder of the purchase.

Housing Industry Association managing director Graham Wolfe said the scheme “offers a sensible first step that mirrors ­existing schemes”.

“As a small and targeted government-backed scheme it offers the chance for low and moderate-income households to achieve their dream of home ownership,” Mr Wolfe said.

To cover running costs, estimated to be $329m over four years, Labor said from July it would double foreign investment screening fees and financial penalties to raise $445m over the budget’s forward period.

Labor’s policy has a sliding scale property-price cap, with only purchases below $950,000 in Sydney and NSW regional centres, $850,000 in Melbourne and environs, and $650,000 in Brisbane, Gold Coast and Sunshine Coast eligible for the equity boost.

If the average purchase is $600,000, and the 10,000 loan places are split evenly between new and existing homes, over the next eight years, Canberra’s borrowings would amount to $17bn, equivalent to an estimated 0.6 per cent of GDP by 2030.

The Grattan Institute’s economic policy program director, Brendan Coates, has calculated a scheme taking shared equity in 10,000 loans a year at an average purchase price of $500,000 would “add at most $5bn to housing ­demand in a $9 trillion housing market, and probably a lot less”.

“This is one piece of the puzzle,” Mr Coates told The Australian when asked how the measure would improve affordability.

He said the Morrison government’s First Home Guarantee scheme, which allows buyers to get a loan with 5 per cent deposit, also exposed taxpayers to losses.

“For some older buyers, ­especially middle-aged women after a divorce, and younger buyers on low incomes it will help them get into the housing market and, in retirement, help them stay out of poverty,” Mr Coates said.

Property Council of Australia chief executive Ken Morrison said he welcomed Labor’s proposed “national housing supply and affordability council”. “The proposed new body needs to have teeth, with incentives and consequences for states and territories to ensure housing targets are met,” Mr Morrison said.

Finance Minister Simon Birmingham said Labor needed to explain “what level of debt it ­expects taxpayers to take on under this scheme and when and how that will be repaid”.

“We want people to own their own home. Under Labor, they want to own your home,” Senator Birmingham said.