In October, the First Home Buyers Guarantee enabled more Australians to buy 5,778 homes. This is a welcome achievement as only one in ten homes sold have taken advantage of this government-backed scheme. The initiative, which allows first-time buyers to secure a mortgage with only a 5 percent deposit, aims to assist those struggling to enter the housing market. The pilot program was extended to applicants of all income levels earlier this month, greatly widening the accessibility for countless hopeful future homeowners.
Under the scheme the government underwrites loans to first home buyers. This backing ensures there is a safety net for lenders by insulating them from the risks associated with smaller deposits. While the plan is designed to tackle pressing concerns, the effort has sparked outrage among political and economic elites. They fear it will be used to raise housing prices even more amidst the current housing supply crisis.
Concerns Over Housing Prices
The Coalition and a number of sympathetic economists have raised the alarm. They caution that the expanded First Home Buyers’ Guarantee might further increase the excessive demand for housing. Home values skyrocketed 1.1 percent just in October. Over the last year, they have increased by an astounding 6.1 percent. These stats paint a very scary picture as an influx of buyers continues to get pushed into the market by the government.
The opposition housing spokesman, Andrew Bragg, blamed the increase in home prices directly on the expansion of the guarantee. He noted that under Labor, the uncapped, non-means-tested 5 percent deposit scheme was established. This policy change is having a devastating impact on entry level first-time home buyers and inflating prices. His comments reflect a growing unease about the implications of such policies on affordability for those at the lower end of the market.
As appropriators in the Senate, we look forward to learning more about the scheme’s results. As Senator Bragg said when he made this request, tracking data will help lawmakers understand this specific program’s effectiveness. Unsurprisingly, concerns have already been raised about the lack of detail. This shortcoming would make a full understanding of the guarantee’s long-term effects difficult, if not impossible.
Government Response and Future Outlook
Housing Minister Clare O’Neil (above) came under fire. Nahan reported being pleased with the early uptake of the First Home Buyers Guarantee in October. She added that the program increases economic empowerment for new homeowners. That’s because now more people will be able to pay off their own mortgage instead of somebody else’s,” she said. Her comments indicate an overall optimistic perspective of the program’s efforts to help first-time buyers secure the benefits of homeownership.
In 2022, the then-Labor government announced the First Home Buyers Guarantee. They took this route to address the challenges that many first-time buyers are experiencing in getting onto the housing ladder. The program allows these people to avoid having to pay lenders’ mortgage insurance. This lowers their out-of-pocket costs and makes homeownership significantly more achievable.
We know the housing market is dynamic. Stakeholders are watching these government actions very closely to see the eventual long term impact they could have on home prices and overall market health. The immediate take-up of the First Home Buyers Guarantee is again indicative of the strong demand currently in the market. It does beg important questions around sustainability and affordability within our already stretched housing landscape.
