Finding ways to help more people buy their own home has been a political challenge for decades.
Heading into the looming federal election, both the Coalition and Labor can agree on at least one policy: expanding the first home buyer loan deposit scheme.
The policy — which allows some first home buyers to purchase a property with as little as a five per cent deposit — will more than triple in size.
And specific carve-outs will be created for those looking for a home in booming regional markets.
The scheme has proved popular since its creation in 2019, and housing industry groups have broadly welcomed the expansion as helping more first home buyers enter the market.
However, some industry experts are worried that, while it might help address a symptom of rising house prices — the need for ever-larger deposits — it won't do anything to address the bigger problem.
What is the scheme anyway?
The biggest challenge most home-buyers face in trying to buy their own place is saving for a deposit.
Most lenders require a 20 per cent deposit before they will approve a home loan, or they will slug the borrower an expensive fee for lender's mortgage insurance (LMI), basically to protect themselves.
So, if you want to buy an $800,000 property, you will need $160,000 in the bank, plus extra for stamp duty and all the other costs associated with buying a home.
The scheme tries to reduce that burden, by allowing first home buyers to purchase with just a 5 per cent deposit, while the federal government acts as a guarantor for the other 15 per cent, allowing a lender to approve the loan without the need for LMI.
There are limits on who can access it and what they can buy, as well as caps on income for first home buyers, and price limitations on properties depending on their location.
The scheme was launched in 2019, with 10,000 spots available, all of which were taken up.
Different variations have since been launched, too, such as the Family Home Guarantee, which helps single parents buy with a deposit as small as 2 per cent.
Both sides of politics have now sought to grow the policy further.
Labor got in first, last week announcing it would create another version of the scheme dedicated to regional buyers, with 10,000 places.
The Coalition then went bigger again today.
It wants to match Labor's promise, with some tweaks, grow the Family Home Guarantee, and more than triple the size of the first home buyers scheme to 35,000 places a year.
Labor welcomed the adoption of the regional buyers policy, and is expected to support the other changes too.
'Potentially going to see higher prices'
Groups such as the Urban Development Institute of Australia and the Housing Industry Association welcomed the move, both arguing the "deposit hurdle" is a huge barrier to first home buyers getting into the market.
However, others — such as economist Brendan Coates from the Grattan Institute — are more cautious.
He argues that, while the scheme will undoubtedly allow more people to buy homes sooner than they otherwise would have, that can bring unintended consequences.
"It will probably see home ownership rise a little bit," he said.
The first home buyers scheme is available to single people earning up to $125,000 per year, and for couples earning up to $200,000.
Mr Coates said that captures a lot of people who would likely wind up buying a home anyway.
He argues that narrowing the scheme to much-lower-income earners would still help people that really need it to buy homes, but reduce some of the pressure the scheme places on house prices.
"You've just got to be really judicious and really careful about when you're acting on the demand side," he said.
"When you are adding to demand, as this will, the risk is that you do increase prices — and such a broad scheme is much more likely to increase prices than a narrow scheme."
What sort of home can $500k buy?
Price caps in the program differ across the country, to reflect different property markets across states and territories.
It varies from $800,000 in the major centres of New South Wales — such as Sydney and Newcastle — to $350,000 in regional South Australia.
But data analysis conducted by property market researchers CoreLogic found that, in some cases, the price caps leave buyers with seriously limited options.
For example, almost no Canberra suburbs had a median dwelling value below the ACT's cap of $500,000 in 2020-21.
Capital city region |
Portion of suburbs where the median value is at or below price caps of scheme for FY 21-22 |
|---|---|
ACT |
1.0% |
Greater Adelaide |
16.4% |
Greater Brisbane |
34.0% |
Greater Darwin |
42.9% |
Greater Hobart |
8.5% |
Greater Melbourne |
20.0% |
Greater Perth |
35.9% |
Greater Sydney |
14.6% |
Supplied: CoreLogic
It is a similar story in Hobart, which also has a cap of $500,000, and Greater Sydney and Adelaide also have relatively few suburbs with median prices below their respective caps.
The CoreLogic data also looks at dwellings, including both apartments and houses.
Buyers looking for a standalone house may find they have even fewer options, given the median house price in Canberra is now greater than $1 million, and sits at more than $1.6 million in Sydney, double the price caps in both cities.
CoreLogic's head of research, Eliza Owen, said the scheme might serve to offset any softening of prices in the lower end of the property market, once interest rates start to rise.
"Historically the [first home loan deposit scheme] has been popular, so I imagine this will serve to offset a decline in demand to a small extent, up to the price caps of the scheme," she said.
"And [it] could, in some areas, drive up prices at the low end of the market due to the ability of more people to participate in home purchases."
Labor has suggested the caps are currently set too low, and has committed to reviewing the price caps immediately should they win office.
Calls for more significant change
Industry experts say the deposit scheme is another example of policy designed to assist people into buying a house, without necessarily making homes more affordable.
Eliza Owen said it certainly would not push house prices down, nor even restrict their growth.
"It is targeting accessibility of ownership, while maintaining the value of housing assets," she said.
Brendan Coates said there were potential solutions to housing affordability, but there has been, so far, little political will to take them on ahead of the election.
"Politicians know there's a problem. That's why they keep announcing stuff," he said.
"But we won't succeed on housing affordability until we start tackling the hard choices, which is boosting supply by reforming planning rules to make it easier to build housing in the major cities — and dealing with the tax concessions that do add to housing demand and push up prices.
"Now, [in] this electoral cycle, no party, no major party, has been willing to tackle those issues. We just have to wait and see if one does."
