One of the key talking points over the course of the recent election has been housing affordability and how it has become incredibly difficult for first home buyers to get into the housing market after the recent boom.
One of the major Labor policies known as ‘Help to Buy’ is the new Government’s idea to help people access housing. The only issue, is they are likely just going to make it even harder for home-buyers to get into the market.
Under the scheme, the Government is proposing that up to 10,000 home-buyers will be able to purchase a property in certain areas up to certain price caps with as little as a 2 per cent deposit, with the Federal Government taking up to a 40 per cent equity stake in a new home or 30 per cent in an established home.
While on the surface this might seem like a helpful tool for those struggling to save for a deposit, the reality is, that this looks like just another demand-side solution.
When you’re incentivising people to buy, what you’re effectively doing is creating more buyers who have to compete against one another to purchase a property. We only need to look at what happened to land prices when the Government rolled out the recent Home-builder package which incentivised people to build. Almost immediately, land values increased by the amount of the incentive and have contributed to a massive labour shortage and even higher prices of new homes.
If the Government were truly interested in helping first home buyers, they need to look towards the other side of the equation which is supply. They should be trying to incentivise people and businesses to bring more housing to the market and reduce the hurdles, red tap and taxes that come with increasing the supply of properties. There was an article written in the Australian on the 20th May 2021 that highlighted how taxes to made up of 40% of home costs.
Unfortunately, more demand-side Government policies are only likely to put further upward pressure on the segment of the market that can least afford it.