First-home buyer plan ‘won’t halt property price slide’

The Coalition’s first-home buyers plan will do little to stem further falls in property values, economists say.

Prime Minister Scott Morrison at a housing construction site at Orchard Hills in Sydney. Picture: AAP

The Coalition’s first-home buyer plan will inject up to $3 billion into the housing market but will do ­little to stem further falls in prices, economists say.

Scott Morrison said yesterday he could extend the government’s first-home buyers scheme ­announced at the weekend, as figures revealed further pressure on lending growth amid the housing downturn. The $500 million housing affordability plan was made in a pre-election assault on Labor’s negative gearing and housing polic­ies, and offers to underwrite home loan deposits for first-home buyers struggling to hit a 20 per cent target imposed by the banks.

Bill Shorten agreed to support the scheme, which will be available from the start of next year to 10,000 first-home buyers who earn up to $125,000 — or $200,000 for couples — who have amassed a 5 per cent deposit. The plan will mean low-deposit ­borrowers won’t need to buy ­lenders’ mortgage insurance.

“If there is greater demand for the scheme, we will be in a position to meet that demand based on capitalisation,” the Prime Minister said.

Figures revealed yesterday that investor demand for housing had slid to its lowest point since 2013 and owner-occupier loan commitments fell harder during March.

According to the Australian Bureau of Statistics, total home loan demand slumped 3 per cent during the month, taking the year-on-year slide to 18 per cent.

Credit growth has now tumbled 26 per cent since late 2017 as banks tighten the screws on loan applicants and investors withdraw from the market. Mr Morrison said the figures showed “again a further climb in first-home owners getting their share of the market”.

“Under the policies that we’ve pursued, investors in the housing market have eased off and owner-occupiers have increased,” he said.

Georgette Nicholas, chief of the Genworth, which sells insurance to banks to cover the risk a low-­deposit borrower will default, said the policy was “targeting a niche part of the market”.

“We think the scheme could help increase demand for residential properties and result in growth in the size of the market, which will benefit everyone,” he said.

UBS economist George Tharenou said the plan could add $3 billion a year in extra stimulus to the property market. However, he said that was a “tiny” share of annual home-loan growth — with $230bn being signed over each year.

“Borrowers also still need to meet responsible lending and ­credit assessments, so this doesn’t make a material difference to our outlook,” Mr Tharenou said, ­noting he expected house prices were still at risk of a “disorderly” collapse of up to 40 per cent.

Mr Shorten described the ­Coalition plan as a “modest program, a restricted program” and said reforming negative gearing was a necessity.

“If you want to tackle housing affordability, it’s only part of a much bigger picture,” he said.

“That’s why we need to reform the unfair playing field where property investors are getting subsidised by the Morrison government to buy their sixth or seventh house and first-home buyers have an unlevel playing field.”