Moves in this year’s Federal Budget to try and improve housing affordability could end up making things worse according to some experts.
Unless the measures address the underlying causes of affordability, some property economists say they could actually further inflate prices.
This week’s Federal Budget provides assistance for single parents in the form of the Family Home Guarantee, to help them enter the property ladder with loan deposits of just 2 per cent.
On top of this the Government is expanding the First Home Super Saver scheme for voluntary superannuation withdrawals and is extending the New Home Guarantee for 5 per cent deposits.
The problem with this schemes is they risk further pumping up the heat in the market by bringing more buyers to the table.
“Property prices are now skyrocketing so continuing to incentivise buying in a strong market runs the likelihood of further increasing prices,” AMP Capital chief economist Shane Oliver told Australian Financial Review.
“The recipients of these schemes are worthy – first home buyers, single parents who are often women – but in the bigger picture sense, it’s going to boost demand.
“So it will increase prices and ultimately benefit existing home owners, while just making the people who do get into the property market do so with much more debt.
“The thing we need to fundamentally do here is boost supply and encourage more decentralisation and get people out of cities and working from home more.”
Tim McKibbin is from the Real Estate Institute of NSW and agrees it’s housing supply that is needed to address affordability.
“These schemes just increase demand and put pressure on prices…so until we have more supply it will continue to be difficult to get on the property ladder,” he told AFR.
“Assisting those trying to get into the market and those who, because of their circumstances, are having difficulty raising a deposit are good initiatives, but when you remove all the noise the real issue with housing affordability is supply.”