Housing affordability: 70,000 helped by plan to wipe 25 per cent of cost of mortgage

The pilot of a shared home-ownership scheme being watched with interest by the Turnbull government has been operating in two states and put more than 70,000 people into homes in the past two decades, new figures reveal, as financial leaders urge the Coalition to act on the nation's housing "market failure".

Turning housing affordability into a key pitch to voters in the looming May budget, Treasurer Scott Morrison has praised the release of the Victorian Labor government's $50 million shared ownership housing pilot for 400 homes as "very interesting".

Any move to introduce a shared house ownership scheme, where the government or a private lender owns up to 25 per cent of a home to help lower the initial purchase price, could also garner support from MPs across the divide,

but would have to address concerns about the potential for such a scheme to drive up prices by giving buyers extra money to bid with. Deputy Opposition Leader Tanya Plibersek said in 2007 that she believed there was a "a strong economic rationale for allowing individuals to hold less than 100 per cent equity in their home."

John Oliver, the chief executive officer of South Australia's government HomeStart Finance scheme, said solutions are often focused on supply-side issues but demand also had to be addressed, particularly for those on low incomes.

"Tighter lending practices means that the main barriers for many buyers are finance-related, such as having enough money to meet upfront costs," he said.

Mr Oliver said HomeStart Finance had helped one in eight first home buyers into ownership in South Australia in the past two decades, and saw a 17.5 per cent rise in home loans between 2015 and 2016, with almost 47 per cent of loans being to first home buyers.

"Our figures show that 42 per cent of customers discharge to refinance with a mainstream lender, with more than 50 per cent of those customers refinancing within the first five years," he said.

In the private sector, Bendigo and Adelaide Bank have led the push to social equity home ownership after a partnership with Rismark. Among the bank's clients was Tony Abbott, whose 2010 parliamentary register of interests reveals the former prime minister once had a shared equity mortgage with Rismark.

Bendigo and Adelaide Bank chief financial officer Richard Fennell said there was there was an opportunity for the private sector to get on board with the shared equity model under any national scheme.

"It needs government funding to really get the momentum going," he said. "They need to invest to get this market up to a scale where other investors see there is enough scale and liquidity for them."

He said the concept presented an opportunity for government to work with business to fix a "clear market failure".

"Residential real estate is the largest asset class in Australia and the only significant way to do it is to buy property and rent them out, and then you have to worry about collecting the rent and hot water," he said.

"It is a good opportunity for super funds to get access to this asset class because this way the home owner is managing those issues for you."

Regal Funds Management senior analyst Omkar Joshi warned any move from a niche to a mainstream ownership scheme would have to be part of a private-public partnership.

"I'm not sure [the housing market] is a risk that the government should be comfortable taking," he said He said any measure to ease housing affordability short of removing negative gearing was just tinkering at the edges.

SMH/ March 7 2017

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