CoreLogic estimates around one third of suburbs across Australia would be accessible to first home buyers wanting to access Labor’s Help to Buy scheme, based on median house prices. That percentage would increase to 43% if house prices were to fall by 10%, as some economists have tipped, while Labor has estimated that its scheme will cost $329 million over the four-year budget estimates.
Lisa Claes, international chief executive at CoreLogic, says the scheme will lead to increased demand for homes in affordable suburbs, pushing up prices and ultimately making them less affordable:
“[The scheme] could place additional upwards pressure on prices in these areas, ultimately making them less affordable”…
“It’s likely demand will be skewed towards the lower priced sectors of the market, especially units where price points are substantially less than house prices”…
The outcome was preordained as soon as this policy was announced. These types of demand-side “affordability” policies always increase demand and put upward pressure on house prices, thereby becoming self-defeating from an affordability perspective. It is basic economics.
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Indeed, AMP chief economist recently described shared equity schemes as a “band-aid solution” at best and counterproductive at worst:
“To the extent that it brings forward demand, there’s a risk this worsens the problem and benefits those already in the property market through higher prices”.
Ultimately, Labor’s Help to Buy scheme is another in a long line of housing policy gimmicks rolled out by both sides that address the symptoms not causes, and make the affordability situation worse.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
