Industry Gives ALP Housing Schemes Thumbs Up

Industry groups have given the new federal Labor government’s housing policies a tick, saying they are confident that it will help tackle housing affordability. 

Labor’s win on the weekend means that its housing policies may soon become a reality. 

At its core is the Help to Buy scheme, which involves the federal government guaranteeing part of the purchase price of a property, with low deposits and no lenders mortgage insurance required. It would be made available to up to 10,000 people. 

Corelogic research director Tim Lawless said the scheme was likely to be popular with prospective homebuyers on low to middle incomes.

“Being able to share up to 40 per cent of the purchase price with the government, along with only a small deposit and opportunity to save on lenders mortgage insurance, helps to overcome several of the hurdles of home ownership,” Lawless said.

“But we need to keep in mind buyers will still have to fund their transactional costs, including stamp duties, legal costs and bank fees.”

Lawless also raised the concern that the 10,000 places could go within the first six months, as was the case with the First Home Loan Scheme, but said that new homes had the extra deterrent of construction costs. 

“Having said that, a higher interest rate environment, which may see lower prices, could make people more cautious about buying, reducing demand for the scheme in the short term,” Lawless said.

“Historically, residential transaction activity correlates with property price movements.

“Additionally, we have just been through a period of significantly elevated transaction activity, including from the first home buyer cohort, where many home purchasing decisions were likely brought forward to take advantage of the swathe of home buying grants and incentives over 2020 and 2021.”

▲ Anthony Albanese's housing policies will help address housing issues but won't completely solve them according to industry groups. Source: ALP

Lawless also warned that there could be risks taking on the scheme. 

“With the housing market probably heading into a downturn over the coming year or years, some buyers may find their home is worth less than the debt held against it,” Lawless said.

“It’s important to know if the government will share in the downside risk if the property is sold while in a negative equity situation.”

Also part of the ALP policy, the Regional First Home Buyer Support Scheme would add 10,000 places to the First Home Loan Deposit Scheme. 

Corelogic research showed that only 33.9 per cent of Australia’s regional suburbs had a house equal in value or under the scheme’s price cap and that 71.1 per cent had units equal in value or under the price cap. 

This could mean a move towards buying units rather than houses.

But regionally, house price to household income ratios are lower than in the cities while regional rent prices have outstripped the capital cities since 2017. 

ACOSS chief executive Dr Cassandra Goldie said housing was the biggest living cost for Australians.

“Regional rents have risen by 18 per cent during the past two years while Commonwealth Rent Assistance hasn’t had a real increase in 20 years—and interest rate rises threaten to push many with mortgages into financial distress,” Goldie said.

“Major housing reforms, including investment in 25,000 social and affordable dwellings per year and an increase to Commonwealth Rent Assistance, are urgently needed by this government to address the growing housing crisis.”

▲ Construction under way on a new social housing complex in Gosford in New South Wales.

Lawless said he also had concerns around how the NHFIC’s rebrand Housing Australia’s initiatives around affordable and social housing, and releasing government land will be funded. 

“It was interesting to note Labor intends to fund some of these initiatives by applying higher fees on foreign buyer purchases,” Lawless said.

“Higher fees and costs associated with foreign buying activity comes after a recent history of substantially higher federal and state-based taxes on this buyer segment.

“In fact, this may have contributed to foreign buying approvals hitting record lows according to FIRB data [and] further disincentives for foreign buying have the potential to keep foreign purchasing at low levels, which could have a negative outcome on rental supply.”

Lawless said the initiative’s 30,000 affordable houses over five years was insufficient with recent Grattan Institute data noting that even with 100,000 extra new homes for those in need, more than two-thirds of Australians on low incomes would be in the private rental market with rent prices rising fast.

He said the limit on places for the schemes, along with income and price caps, would help prevent house prices rising.

Australian Property Professionals managing director Lloyd Edge said the unemployment rate would be the key contributor to driving up interest rates. 

“A higher unemployment rate under Labor would lead to higher inflation, which in turn would speed up further interest rate rises,” Edge said.

“It is more important than ever that home buyers prepare themselves for a series of rate hikes by borrowing under their maximum capacity and not biting off more than they can afford.

“Otherwise, we will see a lot of distressed sellers.”

With the ALP focused on housing and with no tax reform policies on the agenda, Burgess Rawson’s chief executive Ingrid Filmer said she was confident that commercial property demand would continue. 

“The incoming government is welcomed as it’s unlikely to have a major bearing on the commercial property market,” Filmer said.

“Even rising inflation and interest rates so far have had little impact on buyer demand and prices.”