Election campaigns turn up heat on housing — at last

A re-elected Labor Government has just announced it would introduce changes to lending to better support first home buyers.

First home buyers would be able to access 5 per cent home deposits and would also be exempt from paying lenders mortgage insurance (LMI).

On the supply front, a $10 billion investment to build 100,000 homes was revealed, available only to first home buyers, in coordination with state governments.

The Coalition’s policy will allow the superannuation deductions for five years, provided the buyer continues to live in that home for that period. This policy will be available to individuals with a taxable income of $175,000 or less — and joint applicants earning a combined income of $250,000 or less.

Mixed reception for housing policies

Both policies have come in for criticism that by incentivising home ownership, they will only exacerbate the problem by fuelling higher property prices.

On Labor’s low deposit idea, Canstar data insights director, Sally Tindall, said lenders mortgage insurance is an unfair thorn in the side of first home buyers trying to get a foot on the property ladder and a reprieve from it was welcomed.

But she expressed concern about the longer term implications on the property market.

“Importantly, first home buyers participating in this scheme will still have to pass the bank’s serviceability checks to make sure they don’t borrow more than their income can handle, however, the scheme does nothing to address property prices, which is the biggest hurdle most first home buyers face.

“Pushing first home buyers to take on big debts more easily is a band-aid measure that will ultimately push up demand, rather than a silver bullet in the housing affordability crisis.”

Peter Dutton’s plan came in for some withering criticism along the same lines.

Independent economist Saul Eslake told ABC News that the Liberal’s policy to allow first home buyers to deduct interest payments on the first $650,000 of a mortgage against their taxable income was reckless.

“It is a candidate for dumbest policy decision of the 21st century,” he said.

“It will allow those eligible for it, to take out bigger mortgages than they otherwise would, by reducing the after-tax cost of servicing a mortgage.

“In that respect, it is similar to a big cut in interest rates — but restricted to first home buyers who buy new homes, and we know that results in higher home prices, not higher rates of home ownership.”

He added that the Labor plan was also inflammatory for property prices.

There were others with kinder words for the Prime Minister Anthony Albanese and Opposition Leader Mr Dutton.

Australia’s largest home builder, Metricon, said Mr Dutton’s proposed First Home Mortgage Deductibility policy would provide a much-needed boost to housing affordability for young Australians.

“This is a bold and practical step toward improving affordability in a market that has felt out of reach for too many,” Brad Duggan, Chief Executive Officer at Metricon, said.

“With the cost of living continuing to rise and property prices remaining high, first home buyers need real, immediate support to help them take that first step.”

Alex Raphael, Acting CEO, PowerHousing Australia, was supportive of Labor’s Government’s newly announced $10 billion initiative, forming part of the broader $43 billion Homes for Australia Plan, which aims to deliver 100,000 new homes for first home buyers — including unlocking social and affordable housing opportunities on government and council-owned land.

“This is a strong step forward and we commend the government’s recognition that boosting supply is essential, and their commitment to ensuring social and affordable rental homes are part of the solution.

“This is an opportunity to build not just houses, but communities,” Mr Raphael said.

“If we’re using public land to support first home buyers, we must also ensure there is a place for essential workers and renters who’ve been priced out of the market.”

According to research undertaken by the Forest & Wood Products Australia (FWPA), last year Australia built 45,700 homes but needed 57,300, adding to a cumulative deficit now approaching 500,000 dwellings.

Further highlighting the scale of the task confronting parties of any political persuasion, data from Ray White shows that in the last 20 years, the largest price drop experienced nationwide has been just five per cent, with prices otherwise continuously climbing. There has been limited success broadly in achieving affordability.

Nerida Conisbee, Chief Economist, Ray White Group, said the government’s ambitious target of building 1.2 million new homes over five years represents an unprecedented construction challenge, as Australia has never achieved this volume in any five-year period.

“The last time it was achieved was last decade at a time when we had unprecedented levels of foreign capital financing the development of close to 1.1 million homes – surprisingly, both parties are looking at measures to further limit foreign investment despite this previous success.”

Both policies face significant headwinds from Australia’s construction industry realities.

 

“Building costs have been outpacing house price growth, making it more affordable in most parts of Australia to buy an existing home than purchase a new one,” Ms Conisbee said.

“This cost pressure undermines policies aimed at encouraging new construction.

“Construction challenges have worsened, with industry insolvencies continuing to rise and now exceeding 1,200 annually.

“Labour productivity remains low, and the average time to complete a house has increased from approximately 6.5 months pre-pandemic to over 10 months today, and these factors severely limit the industry’s capacity to deliver on ambitious housing targets.”

With an eye out for the most underprivileged, Everybody’s Home spokesperson Maiy Azize said the promises made by the major parties on Sunday (13 April) fall well short of what’s needed to address the housing crisis and could in fact make it even worse.

“(Both parties’ announcements) fall short of what is needed to end the country’s deepening housing crisis,” she said.

“The Coalition’s proposal to allow mortgage payments to be tax deductible for first home buyers is a form of negative gearing for non-investors, a move that will give more help to people on high incomes and could push home prices even higher.

“To make housing more affordable, we need to get rid of tax breaks when it comes to property, not create more.

“Labor’s home deposit support for first-home buyers will also add to demand.

“Building 100,000 homes is a good step, but they aren’t guaranteed to be affordable.

“Australia doesn’t just need new homes, we need homes that people can actually afford.

“To turn the housing crisis around, the next federal government must invest significantly in building more social housing; low-cost rentals that are guaranteed to be affordable and won’t drive up demand and house prices.

“We have a social housing shortfall of 640,000 homes in this country and it’s growing,” Ms Azize said.