The federal election is less than a month away and there has been little talks addressing housing affordability in Australia or the property industry in general. The last election was pretty much won or lost on capital gains tax. This year, the only real attempt has been expanding on the existing first-home buyer scheme – an incentive that will arguably exacerbate the housing affordability issue.
So, what is the first-home buyer scheme? And who is eligible?
Under the Home Guarantee Scheme, eligible first-home buyers will only need to have a 5 per cent deposit in order to buy a home and the Victorian government will provide a guarantee for up to 15 per cent of the purchase price. When the buyer decides to sell the property, they are required to repay the government’s proportional interest.
Although there is a catch, to be eligible for the government support, singles must be earning an annual income of $125,000 or less and couples must have a combined household income of $200,000 or less. Since its inception in 2021, I have come across just two first-home buyers interested in the scheme. A sign there is much uncertainty and confusion around the terms of the grant and very few people who are taking advantage of the scheme to get into the property market.
Home ownership in Australia is changing. The pandemic has proven people want to live in stand-alone houses with a backyard instead of apartments. What the government should be doing is making it easier for developers to create homes that people want to live in, instead of taxing developers on new projects. A possible solution is to open more parcels of land rather than invest in high density developments in the city.
The government can’t just switch off a tap or wind back house prices to be 1980 prices again. What they are trying to do is make it achievable for people to enter the property market. But the law of unintended consequence is, by allowing people to spend more on a house, they are driving up property prices and adding fuel to the housing affordability fire.