Australia: Labour’s major expansion of the home guarantee scheme will help more Australians buy their first home, but experts warn it risks pushing property prices even higher.
The scheme, first introduced in 2020, allows eligible first-time buyers to enter the market with a deposit as low as 5 percent without paying costly lender’s mortgage insurance. The government covers up to 15 percent of the loan as a taxpayer-backed guarantee, a move aimed at cutting years off the time required to save a deposit.
Housing minister Clare O’Neil announced that from October, the programme will no longer be capped at 50,000 places, opening access to an unlimited number of buyers. Income caps will also be removed, alongside higher property price limits.
Independent property expert Cameron Kusher said the policy would likely fuel competition in an already tight housing market. Kusher stated that, “This type of stimulus is getting larger and more exotic. I expect prices to be higher and then for the government to provide even larger levels of support for the next cohort of homebuyers. It’s good politics; it’s not good economics.”
Treasury has estimated the policy will only add 0.5 percent to home prices over six years, but Kusher described that projection as very hard to believe.
Brendan Coates, director of the Grattan Institute’s housing programme, echoed concerns, questioning why the scheme’s eligibility was widened. Coates remarked that, “Everyone who was going to struggle to buy a home, overwhelmingly those on low incomes, were already eligible. It’s a backwards step in the sense we are offering support to people who don’t need it and who were likely to buy anyway.”
Peter Tulip, chief economist at the Centre for Independent Studies, warned the expansion gave borrowers a one-way bet. Tulip noted that, “If prices rise, they make a pile of money, and if prices fall, then the taxpayer cops it. So this is likely to encourage reckless borrowing and bidding. To be precise: it’s going to make bubbles more likely.”
KATRIN BOLOVTSOVA@Pexels | Cropped by BH
Tulip, like other economists, argued that addressing supply should remain the government’s priority. Despite Labour’s target of building 1.2 million homes by 2029, the National Housing Supply and Affordability Council predicts a shortfall of 262,000 homes.
Prime minister Anthony Albanese insisted his government was determined to tackle the housing crisis. Anthony Albanese remarked that, “If you don’t have a target, you’re not trying,” defending Labour’s housing commitments.
Still, experts caution that without significantly boosting supply, policies designed to help first-home buyers risk worsening affordability by driving prices higher.
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