For some, the Coalition’s victory meant that there was a chance for a turnaround in housing markets. However, Labor Party supporters who believe Australia has missed the opportunity to address the affordability crisis are staunch.
Jessica Irvine, a market watcher and writer for Brisbane Times, stated that “the aftermath of the federal election saw a lurching shift in the prospects Australian property prices,” in a piece.
Instead of helping first-home buyers achieve homeownership by reducing the cost of housing, she believes the Coalition-led government seems to want to boost prices through policies which will result in more demand — the new first-home buyer deposit scheme allowing borrowers to take on home loans with as little as 5% deposit is one.
“Such borrowers who are lucky will be able get into the market with huge loans. They’ll have to pay thousands of dollars more interest than if they saved a larger deposit. Irvine stated, “It is obvious that the best way to help first home buyers” is to reduce housing costs.
She also stated that the Australian Prudential Regulation Authority’s (APRA), go-signal to banks to relax the stress tests applied to borrowers would only allow for greater demand for credit which would cause prices to calm down.
“The decision recognizes that interest rates are now significantly lower than they were when the rule was introduced in 2014. “And history has shown that when Australians are permitted to borrow more, they do so, driving up house prices,” she stated.
Irvine claimed that not all housing markets are affordable despite significant price declines over the past few years. For example, Sydney has seen a 14.5% drop in housing prices since the height of the housing boom. Despite this substantial decline, prices are still 21.1% higher in the city than they were five-years ago.
Melbourne is another example — while it has witnessed a 10.9% decline, its median home price remains 24.2% more expensive than it was five years ago.
Irvine claimed that Labor’s defeat means that Australia has “eschewed any policy platform that would have limited tax cuts that inflated the housing demand and made homeownership more affordable for many.” Prior to the elections, Labor heavily campaigned on a promise to limit negative gearing and change rules surrounding capital gains tax — two proposals which, the party believed, would level the playing field between homebuyers and investors.
“Most young Australians want to get into the market and retain the perks of the past generations. They shouldn’t be denied the tax savings that have proven so profitable for previous generations. She said that the only problem is that not everybody can afford to purchase this dream property.
Irvine believes that Coalition policies will only widen the divide between property “haves”, and “have nots”.
She stated that “we’ll be again wringing out our hands about the housing affordability crises and how skyrocketing property prices are locking out many young Australians in the housing dream.” “And that day we’ll be able look back and remember the week when policymakers decided to fan the flames in our property furnace by inviting new home buyers to the fire.”
Others believe that some government policies could put homebuyers at serious risk.
Douglas Driscoll, CEO of Starr Partners, acknowledged that the program could provide benefits but also warned that it could cause “long-term pain.”
He stated that while it is easier to buy now it can also burden buyers with higher monthly repayments and the possibility of paying thousands more interest to the bank over a loan’s life cycle.
Brendan Coates, Grattan Institute Australian Perspective Fellow, shared the same view. He said that the scheme was inefficient in its current form, which only funds for 10,000 homebuyers per year.
“If you assume that each one of those 10,000 people wouldn’t have bought a home otherwise, then after a decade, the chances of homeownership increasing by 1% are very real. The risk is that this policy could be extended to more people than 10,000, which will increase prices, making affordability worse,” he said to The New Daily.
Coates believes there is only one way for the government to help first-home buyers break into the market — let prices fall.
He stated, “That’s how you can win home buyers.”
However, planning constraints in major cities limit the housing supply that is possible.
“One reason people say no is because they don’t know what to do.” [to apartments]Their distrust in the quality of their buildings is a reason. Coates explained that there’s a problem in the quality of what’s been built. “You probably need to modify planning rules to accommodate this,” Coates said.