Election 2025: Politicians hungry for housing vote show prudence the door

Australia’s property value-to-income ratio has now hit eight, up from six just five years ago. Picture: Getty Images

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Forget political parties doing the economically and fiscally responsible thing with housing in Australia. That went out the window long ago.

The only thing that matters over the next 19 days is whether one party’s housing policies win more voters than the other mob’s.

That’s what Australia has, unfortunately, descended to, and it’s especially so in housing.

Australia’s property value-to-income ratio has now hit eight, up from six just five years ago. House and apartment values have increased 30 per cent, while wages are only up 15 per cent.

It means the Australian dream of owning a home is getting further and further out of reach.

So far in this election it seems the Coalition is willing to risk more of its traditional economic management prowess on housing sweeteners for first-home buyers than Labor is with its traditionally less-recognised economic management skills.

On the demand side, the Coalition is offering more than Labor, but potentially exposing itself for being more economically and fiscally imprudent.

It has matched Labor on extending the Morrison government’s Home Guarantee Scheme, where people with just a 5 per cent deposit can get a guarantee from the government for another 15 per cent and avoid paying lender’s mortgage insurance – a substantial cost for a first-home buyer. The criticism here is that the government is taking on the risk of a high-risk borrower.

Another Coalition policy is to direct the financial stability regulator to lower the home loan serviceability buffer from 3 per cent to 2.5 per cent, which means the buyer can borrow more than they could have before with the same amount of income and expenses. The criticism here is that the government of the day is not responsible for assessing the financial capacity of a borrower and risks seeing people to fail to pay off their mortgage.

The Coalition will also allow people to access their superannuation, taking up to $50,000 for a home loan deposit. The criticism here is that it could create a liquidity risk for superannuation. The Reserve Bank’s financial stability report noted this last week.

More controversially, the Coalition’s latest policy – known as the First Home Buyer Mortgage Deductibility Scheme – allows first-home buyers to deduct the interest paid on their mortgage from their assessable income within a certain limit. There is plenty of criticism for this policy, including that people should only get a tax credit if they are actually paying some sort of tax on their property, such as a capital gains tax.

Another is that people on higher incomes of up to $175,000 can potentially get more of a benefit than those on lower incomes who can’t afford as big an interest payment.

But for people like Oscar Boman, who lives in the marginal seat of Brisbane, won by the Greens at the last election, the Coalition’s policies are about winning his vote, not about getting the economics right. He will probably vote Liberal on May 3.

“For someone who pays a lot of tax, the Coalition’s policy of a tax credit is more beneficial to me than the 15 per cent deposit guarantee,” the 28-year-old Boman says.

The developer looking to sell him the property, Red & Co’s David Laverty, also likes it and says that developers will only create new supply if they can get presales from people like Boman.

“I think the Coalition policy is likely more attractive for a first-home owner,” Laverty says. “If they were going to buy, typically most prudent people want to put in 20 per cent anyway so the real kicker would be the tax deductibility.

“The thresholds of $650k and earnings look like they would capture a bulk of that market also. Good policy if you want to incentivise buyers.”

And voters too it would seem.