Hot on the heels of the Albanese Government’s Help to Buy scheme, the NSW Government has also announced its very own shared equity housing affordability gimmick.
The NSW government will launch a two-year trial of a $780 million shared equity scheme for first-home buyers (FHBs), which will allow eligible participants to enter the property market with a deposit of just 2%. However, the scheme will be means-tested and will include a cap on the value of the property.
From The Guardian:
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The shared equity scheme allow buyers to enter the market with a deposit as low as 2% of the sale price. It will see the government contribute an equity share of 40% for a new home or 30% for an existing dwelling.
The scheme is means tested and eligible households are limited to a maximum gross income of $90,000 for singles and $120,000 for couples…
The maximum property value is $950,000 in Sydney and some regional centres like Newcastle, Illawarra and the Central Coast.
The cap will be $600,000 in other parts of the state.
The trial will take place over two years. Similar schemes already exist in the United Kingdom, Western Australia, Tasmania, Victoria and South Australia.
The ultimate impact of these types of demand-side “affordability” policies is that they increase demand and put upward pressure on house prices, especially at the lower end. In turn, they ultimately make homes less affordable.
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”.
The NSW Government’s shared equity scheme is another in a long line of housing policy gimmicks rolled out by both sides across all jurisdictions that addresses the symptoms not causes, and ultimately makes the affordability situation worse.
If the NSW Government truly wants to help the housing situation, it should stop lobbying for an “explosive” surge of 2 million migrants over the next five years to boost the economy.
Flooding Sydney with hundreds of thousands of migrants would necessarily place strong upward pressure on house prices and rents, as well as bulldoze Sydney’s suburbs into high density.
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