{"id":188795,"date":"2025-04-13T19:10:13","date_gmt":"2025-04-13T09:10:13","guid":{"rendered":"https:\/\/propertyupdate.com.au\/?p=188795"},"modified":"2025-04-17T11:47:13","modified_gmt":"2025-04-17T01:47:13","slug":"major-parties-housing-promises-will-only-push-up-property-prices","status":"publish","type":"post","link":"https:\/\/propertyupdate.com.au\/major-parties-housing-promises-will-only-push-up-property-prices\/","title":{"rendered":"Major parties\u2019 housing promises will only push up property prices"},"content":{"rendered":"

Australia's housing crisis has become a fierce political battle that could have major implications for the outcome of the upcoming federal election.<\/p>\n

The problem is there are no quick fixes to the housing crisis, yet both the Coalition and Labor continue to chase short-term solutions that don't address the real issues.<\/p>\n

Anything easy and popular won\u2019t work to solve housing affordability.<\/p>\n

As I see it, the fierce battle over housing is set to intensify and define the election as Labor, the Coalition and the Greens target a growing cohort of voters who believe they've been locked out of home ownership for life.<\/p>\n

The promises election promises made by the major parties over the weekend fall well short of what\u2019s needed to address our housing crisis \u2014 in fact, they are likely to make it worse!<\/p>\n

Sunday's election announcement from Labor proposes to allow all first home buyers to purchase a home with a 5% deposit to avoid lenders mortgage insurance and will commit $10 billion to build 100,000 new homes for them.<\/p>\n

The Labor Party said, if re-elected, it will expand the current First Home Guarantee Scheme by increasing the property price caps, abolishing the income caps, and removing the limit on the number of places available.<\/p>\n

\"Anthony<\/a><\/p>\n

Buyers that have a deposit of less than 20% are typically required by their bank to pay lenders mortgage insurance (LMI) unless a family member guarantees their loan \u2013 a cost that easily runs into the tens of thousands of dollars and only goes to protecting the bank, not the borrower.<\/p>\n\n\n\n\n\n\n\n\n
LMI costs for a median priced apartment - $673,491<\/strong><\/td>\n<\/tr>\n
Deposit %<\/strong><\/td>\nDeposit $<\/strong><\/td>\nEstimated LMI<\/strong><\/td>\n<\/tr>\n
5%<\/td>\n$33,675<\/td>\n$26,888<\/td>\n<\/tr>\n
10%<\/td>\n$67,349<\/td>\n$14,911<\/td>\n<\/tr>\n
15%<\/td>\n$101,024<\/td>\n$7,255<\/td>\n<\/tr>\n
Source: Canstar.com.au<\/a>, CoreLogic, Helia. Based on an owner-occupier first home buyer paying principal and interest with a 30 year loan term. Apartment price is based on the national median cost for a unit from CoreLogic for 31 March.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Under the scheme, which was introduced by the former government and began in 2020<\/a> as the First Home Loan Deposit Scheme, the government acts as a guarantor, sparing borrowers from LMI costs.<\/p>\n

However, it is well recognised that if you give more first time buys more money, or the ability to buy more expensive properties they will spend it, and so I see this is an \"established home owner's grant\" more than the first homeowners grant s it will push up the value of properties and just kicking the housing affordability problem down the road as nothing has been done to increase supply.<\/p>\n

While Labor's promise of building 100,000 homes is a good step, its home deposit support for first-home buyers will also add to demand and these new homes aren\u2019t guaranteed to be affordable.<\/p>\n\n\n\n\n\n\n\n\n\n\n
First Home Guarantee Scheme<\/strong><\/td>\n<\/tr>\n
\u00a0<\/strong><\/td>\nCurrent scheme<\/strong><\/td>\nProposed new scheme<\/strong><\/td>\n<\/tr>\n
Places per year<\/td>\n35,000<\/td>\nUnlimited<\/td>\n<\/tr>\n
Minimum deposit size<\/td>\n5%<\/td>\n5%<\/td>\n<\/tr>\n
Income cap<\/td>\n$125k for singles, $200k for couples<\/td>\nNone<\/td>\n<\/tr>\n
Property price cap (Syd)<\/td>\nUp to $900k (Syd)<\/a><\/td>\nup to $1.5m (Syd)<\/td>\n<\/tr>\n
Participating lenders<\/td>\n38<\/a><\/td>\nNo change<\/td>\n<\/tr>\n
Notes: Income based on ATO notice of assessment. Property price caps vary according to location. Open to Australian citizens and residents aged 18 or over who are first home buyers or buyers who have not owned property for 10 years or more. Full details here<\/a>.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Canstar<\/a>.com.au<\/a> data insights director, Sally Tindall, said,<\/p>\n

\n

\u201cLenders mortgage insurance is an unfair thorn in the side of first home buyers trying to get a foot on the property ladder, particularly considering that money spent on this insurance goes towards covering the bank, not the borrower.\u201d<\/p>\n

\u201cThis proposed expansion to the scheme will put more first home buyers on a more even footing when it comes to purchasing property.<\/p>\n

\u201cRemoving the need to pay LMI will even-up the playing field between those first home buyers with access to a family member willing to go guarantor and those who do not.<\/p>\n

\u201cHowever, while there are plenty of success stories from Australians who have already used the scheme and had the guarantee removed from their loan, some borrowers who used this program and stretched themselves when rates were at record lows have not found it easy.<\/p>\n

\u201cImportantly, first home buyers participating in this scheme will still have to pass the bank\u2019s serviceability checks to make sure they don\u2019t 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.<\/p>\n

\u201cPushing 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.\u201d<\/p>\n<\/blockquote>\n

Of course, buying a home with a deposit of as little as 5% can be risky, and first home buyers would need to understand the financial and logistical implications of taking on this kind of support.<\/p>\n

Borrowing with a small deposit using the scheme can potentially mean buyers:<\/p>\n