Prime Minister Scott Morrison has outlined a major plan to help younger Australians buy their first homes in an election campaign launch that triggered a response within hours when Labor vowed to match the policy.
Mr Morrison said a re-elected Coalition government would set up a scheme to offer loan guarantees for first home buyers so they could buy their properties with deposits of just 5 per cent of the price.
Labor moved quickly to match the idea and avoid a political fight over housing affordability, after the government presented its plan as a better way to help young home-buyers than Labor’s proposal to scale back tax concessions on negative gearing.
The government proposal is a significant departure from previous attempts to help younger people trying to get into the housing market, requiring $500 million in guarantees and possibly more over time.
But it will not be open-ended. The government intends to borrow $500 million so it can invest the money in the National Housing Finance and Investment Corporation, which would offer the guarantees to aspiring home-owners.
The scheme would be capped at 10,000 loans every year, about one tenth of the market given estimates that there were about 100,000 loans to first-home buyers last year.
The National Housing and Investment Corporation would support the buyers for the life of their home loans or until the value of the property rises to a point where they choose to refinance.
“That would include guaranteeing, to approved applicants, the additional loan amount taken out by the first-home buyer to cover the difference between the lower deposit of, say, 5 per cent and 20 per cent of the value of that property,” Mr Morrison said.
“This scheme would give preference to working with the smaller banks and the non-bank lenders to boost competition.
“Of course, the lenders would still be the ones lending the money. They would still do all the normal checks on the borrowers to make sure that they can meet their repayments -this isn’t free money.
“The scheme will be available to first home buyers with an income of up to $125,000 or a couple with $200,000 where they are both first-home buyers.
“The support would stay in place for the life of the loan, and when they refinance in a few years’ time, when the equity increases, which it would under a Liberal National government, then that’s when the guarantee ceases.
“But they’ve got their first leg on the first rung of the ladder.”
The proposal takes on Labor over property prices and younger Australians, as Opposition Leader Bill Shorten seeks to raise $32 billion over ten years from changes to negative gearing and capital gains tax but plays down the impact of his policy on the real estate market.
The new policy, called the First Home Loan Deposit Scheme, will be available from January 1 for those who have saved at least 5 per cent of the value of the home, but it will also be subject to limits for each market.
“The value of homes that can be purchased under the scheme will be determined on a regional basis, reflecting the different property markets across Australia,” the Coalition said in a press release after Mr Morrison’s speech.
This suggests the government would have to apply a cap on the value of the homes that would qualify, and therefore limit the exposure to the Commonwealth from the guarantees over 15 per cent of the loans.
The government has not said what those caps would be, but it assumes that most first-home buyers would not use the scheme.
People occupying their own properties took out $19.7 billion in housing finance in November, according to the Australian Bureau of Statistics. About 18 per cent of these loans went to first-home buyers.
Labor treasury spokesman Chris Bowen moved to neutralise the issue shortly after 3pm on Sunday.
“Labor will match this commitment,” Mr Bowen said in a statement.
“After six years of failure, and six days before an election, the Liberals are desperately trying to tell young Australians they understand their struggles to buy their first home,” Mr Bowen said in a statement.
“We back genuine support for first home buyers ? that’s why we are also reforming negative gearing for future purchases, so young Australians don’t have to keeping losing out to wealthy property speculators.”
The $500 million cost of the policy does not deepen the budget deficit or weaken future surplus for either major party. As an investment, it will be treated as a capital item rather than expenditure.
SMH/ May 12, 2019