A plan to lift the scheme's price caps does little to address core affordability issues, experts say
A Coalition plan to increase support for first-home buyers is actually a recipe for higher home prices, economists have warned. The plan, also backed by Labor, does little to address the issues that are making Australia one of the world’s most expensive property markets, they said.
On Monday, the Coalition announced that the price caps on its home loan guarantee scheme would be raised, while the number of guarantees will also be hiked. The scheme allows people with a deposit as low as 5% to get on to the property ladder.
In New South Wales, people buying properties worth up to $900,000 in Sydney and major centres, and homes worth up to $750,000 in regional areas, would qualify for the program, according to The Sydney Morning Herald. In Victoria, the major city cap would rise to $800,000, with the regional cap rising to $650,000.
Jo Masters, chief economist at Barrenjoey, told the Herald that the policy simply brought forward purchases, putting more upward pressure on home prices.
“There’s no simple solution to dealing with the prices in the property market,” she said. “Just stoking demand is not one of them.”
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Brendan Coates, economic director at Grattan Institute, said the lift in price caps would only marginally impact prices, but the expansion of the scheme would increase demand.
“If you want to put in place policies that really deal with the issues in the market, then you have to do far, far more – and neither side of politics wants to do that,” Coates told the Herald. “There’s still too little supply and too much demand.”
Shadow Treasurer Jim Chalmers said that Labor had been pushing for some time to raise caps on the scheme, and that broader policies were needed to address housing affordability.
“This is helping people get a toe-hold in the housing market, which we think is absolutely important, crucial, that that happens – but it’s not the only step you need to take in housing,” Chalmers said.
