Labor’s first-home deposit boost to push up house prices: Treasury
The Albanese government is admitting that Treasury expects the expansion of the home guarantee scheme to put ‘very minor’ upward pressure on housing prices.
First-home buyers will need only a 5 per cent deposit from October, as the Albanese government brings forward an expansion of the home guarantee scheme, despite admitting the policy would put “very minor” upward pressure on property prices.
The expansion of the scheme, which was criticised during the election campaign by economists Saul Eslake and Chris Richardson as doing nothing to tackle affordability problems, will abolish the 50,000 yearly cap on the number of first-home buyers and single parents who can have mortgages guaranteed by the government.
The new scheme would also remove the income cap of $125,000 for a single and $200,000 for a couple, with single parents able to avoid lenders’ mortgage insurance with a deposit of just 2 per cent.
There is also an expansion of the value of the property that can be purchased under the scheme, increasing to $1.5m in Sydney, $1m in Brisbane and Canberra, $950,000 in Melbourne, $900,000 in Adelaide and $850,000 in Perth.
The property price caps range from between $400,000 and $800,000 in regional areas.
Treasury predicts 70,000 homes will be bought through the scheme in the next 12 months, with the policy to put up house prices by 0.5 per cent over the next six years.
The government argues it has a suite of separate measures to make housing more affordable, including a $10bn pledge to build 100,000 homes for first-home buyers and creating the Housing Australia Future Fund.
Treasury says the policy will see first-home buyers save $15,000 on lenders’ mortgage insurance on a $500,000 home and $41,000 of LMI on a $1m property.
After Jim Chalmers talked up the need to address intergenerational inequality at the end of last week’s economic reform roundtable, Anthony Albanese said the government wanted to “help young people and first-home buyers achieve the dream of home ownership sooner”.
“Bringing the start date of our 5 per cent deposit scheme forward will do just that, getting more Australians into their own home quicker, while saving them money along the way,” the Prime Minister said.
“Labor was re-elected with a clear mandate to bring down the deposit hurdle for first-home buyers, and we’re delivering.”
Housing Minister Clare O‘Neil said the government was “stepping up to level the playing field and back a new generation of first-home buyers”.
“It’s just not right that an entire generation of young Australians have been locked out of the housing market – saving for decades while paying off someone else’s mortgage. So Labor’s changing it,” she said.
The move to help first-home buyers came as the government at the weekend unveiled fresh policies to unlock more supply, including freezing part of the National Construction Code for at least four years and fast-tracking environmental approvals for 26,000 homes.
Ms O’Neil also said the government would take action on proposals endorsed by the economic reform roundtable, including reducing barriers for superannuation funds to invest in housing.
Despite Treasury and other experts saying the government would not meet its target to build 1.2 million homes by 2029, Ms O’Neil said she had not given up on the goal.
“We are working towards making the target. This is a really ambitious goal for the country, and I hope people see and applaud that ambition, because this is exactly what is needed,” she told Sky News.
She also talked down an ACTU push for a clampdown on negative gearing and capital gains tax concessions, arguing the biggest issue on affordability was increasing supply.
Opposition Treasury spokesman Ted O’Brien said it was clear Labor was using the roundtable only as “cover” to adopt the policy to freeze the construction code, which was originally posed by the Coalition. “They had to call a roundtable to basically provide cover for the fact they’ve adopted Coalition policy,” he told Sky News.
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