The newest culture war battleground: Australian house prices

First home buyers are the victims of an Albanese government culture war against property owners, the Coalition will claim as it ramps up its attack on the cost of housing amid Labor accusations that a Liberal plan to ease lending standards would lift interest rates for millions of existing borrowers.

As questions grow over the Reserve Bank’s handling of interest rates, Liberal frontbencher Andrew Bragg will argue that the nation’s social fabric is at stake if homeownership continues to fall.

Liberal senator Andrew Bragg says Labor is running a culture war against home ownership as he argues for changes aimed at first-time buyers.Credit: Alex Ellinghausen

Data released on Tuesday by the Australian Bureau of Statistics showed the total value of the nation’s dwellings increased to a record $11.1 trillion to the end of September. Over the past year, it has risen by $800 billion.

House values have jumped by $3.8 trillion, or 52 per cent, since mid-2020, as the Reserve Bank slashed interest rates to record lows while governments pumped hundreds of billions of dollars of stimulus into the economy.

Meanwhile, homeownership rates have fallen across almost every age group over the past 40 years. People aged 35 to 44 are 18 per cent less likely to own a home than they were in 1981, while for those aged between 25 and 34, home ownership is down by 20 per cent.

Bragg will use a speech to the Mortgage and Finance Association of Australia on Wednesday to argue for an overhaul of the nation’s banking regulator that recognises the central role of home ownership.

The proposals, including changing the Australian Prudential Regulation Authority’s charter to include the plight of first home buyers while reducing the 3 percentage point interest rate buffer imposed on their loans, formed the key recommendations of a Senate committee chaired by Bragg.

“This is not just about economics; it is about preserving the social fabric of our nation. Home ownership fosters stability, security and individual aspiration,” he will say.

The Coalition has promised to allow first home buyers to withdraw up to $50,000 from their superannuation towards a deposit.

Bragg will say the government’s policies, including its recently approved Build to Rent tax concessions and its $10 billion Housing Australia Future Fund, showed the government had “abandoned the notion of individual homeownership”.

Reducing the 3 percentage point buffer on first home buyer mortgages, and requiring the regulator to consider the interests of first-time buyers, would give them a better chance of owning a home.

Describing the changes as “surgical” recommendations that balanced strong banking regulations with the aspiration of homeownership, Bragg said APRA had to be mindful of the situation facing potential buyers.

“APRA’s policies are currently developed in a vacuum, with no consideration of how they affect first home buyers and their ability to enter the housing market,” he will say.

But there are concerns Bragg’s proposals would undermine banking stability and increase the cost of borrowing for everyone else.

In a dissenting report to Bragg’s inquiry, Labor senators noted even supporters of the changes admitted that banks would have to change their risk profiles across entire mortgage books at a cost to those who already held loans.

Interest rates for existing mortgage holders could increase by 0.06 or 0.07 percentage points. On a $600,000 mortgage, that would translate to an extra $30 in monthly repayments and $10,000 over the life of the loan.

“Recommendations made by the chair [Bragg] would result in higher house prices for both first home buyers and owner-occupiers, expose first home buyers to greater risks they cannot afford, and add systematic risk to the financial system – all without building a single home,” the Labor senators said.

“This proposal has the effect of pitting first home buyers against existing borrowers, forcing existing borrowers to pay more in interest.”

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