Parties’ First-Home Buyer Pitches ‘Missing Ingredients’

The major parties have made their bids to win over first-time home buyers as campaigning in the lead-up to the May 3 federal election heats up.

At the weekend the Australian Labor Party unveiled a commitment to spend $10 billion “to partner with state developers and industry” and build up to 100,000 homes for first-time buyers.  

The ALP has promised to extend its 5 per cent Home Guarantee Scheme—under which it effectively underwrites 15 per cent of the value of the property—removing the annual cap of 50,000 places and income thresholds, as well as property price gaps.

The median home price in Australia today was $820,000, so a 5 per cent deposit is $41,000, which would have covered the full 20 per cent deposit in 2002, Labor said.

The Coalition meanwhile announced it would allow first-time buyers of new-build properties to deduct interest on up to $650,000 of their mortgage against their income, with no limit to the purchase price of the house or apartment, or the size of the mortgage.

However, the property industry, while supportive of those measures, said neither party went far enough to consider wider issues of feasibility and affordability.

Urban Taskforce Australia chief executive Tom Forrest said that the policies must “not reduce or replace efforts to cut the costs of bureaucracy, red tape, local and state infrastructure charges or affordable housing taxes—which are all applied to property by the states and local government”. 

“One of the key constraints on housing supply is being able to show financiers and investors that there are enough new home buyers that can afford to pay for the new homes,” Forrest said.

But given construction cost rises, feasibility had been poor, he said, encouraging further interest rate reductions. 

“Both the measures announced ... are welcome. But we will be looking for infrastructure investment—roads and water infrastructure in particular—to complete the picture,” he said.

“Any support for the states and local government must be matched by a commensurate reduction in their proposed infrastructure fees and charges, which have crippled project feasibility and held back supply for too long.”

Speaking at the National Housing Solutions Summit on April 1, the Coalition’s shadow housing minister Michael Sukkar said that demand for housing “is more than double the supply”. 

“We have a $5-billion infrastructure program that we think will unlock around 500,000 homes.” Sukkar told the summit. 

▲ Relevant infrastructure investment is vital, says the industry.

Meanwhile, Minister for Housing Clare O’Neil told the summit that the Federal Government was investing $1.5 billion in funding to unlock land that is already being built on, with another $3 billion available for the states.

Housing Industry Association managing director Jocelyn Martin said that governments imposed “significant costs on new home building that have restricted the supply of new homes over recent decades”. 

“In Sydney, up to $575,000 of the cost of a new house and land package is just the taxes, fees and charges,” she said. 

“The first 15 years of a mortgage are spent paying for government costs, and the second 15 years pay for the land and the home.

“In addition to the policies announced today, all tiers of government need to work together to bring down the cost of delivering a new home to market.”

Construction costs

Master Builders chief executive Denita Wawn said that given its predicted 160,000-home shortfall of the National Housing Accord target, more assistance was needed across construction.

“Supporting first-home buyers is only meaningful if we’re also making it easier to build the homes they want to live in,” she said.

“A key missing piece of the puzzle from the ALP’s combined housing plan is more skilled people.

“From apprentices on the tools to planners in council offices, workforce shortages are putting a handbrake on housing delivery.

“We need a co-ordinated workforce plan that includes investment in training, incentives for small business employers, and a dedicated construction pathway for skilled migrants,” Wawn said.