Yahoo Finance The real winners of the Home Guarantee Scheme
Demand-side leg-ups, such as the Home Guarantee Scheme and HomeBuilder, tend to only be useful for first home buyers who are already close to buying a home, according to a new report.
The Australian Housing and Urban Research Institute (AHURI) report also found these types of policies drove up house prices.
“Current Australian first home buyer assistance measures primarily act to bring forward first-home purchases for households already close to doing so, rather than opening home ownership access to households otherwise excluded,’ report author Chris Martin of UNSW City Futures Research Centre said.
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“These measures simply add to demand and push up property prices,” Martin added.
Declining home ownership has prompted state and territory governments to help buyers get a foot on the housing ladder.
In recent history, governments have favoured “demand-side assistance”, such as grants, to help first home buyers.
According to the report, Australian governments have poured $20.5 billion into first home buyer grants and other demand-side first home buyer assistance in the past 10 years - and these types of schemes are only becoming more popular.
Examples include the Home Guarantee Scheme, which allows first home buyers to buy a property with a 5 per cent deposit with the Government becoming a guarantor for the remaining 15 per cent.
Grants like the HomeBuilder scheme, which amounted to cash handouts for people to build homes during COVID, are also examples of demand-side instruments.
Stamp duty concessions also fall under this characterisation.
All demand, no supply
The report compared Australia’s approach to helping first home buyers to several other countries: Canada, Finland, Germany, Ireland, the Netherlands, Singapore and the UK.
It found the other countries relied on a combination of demand-side and supply-side measures - such as building more social housing - to help buyers crack into the property market.
While Australia grew post-war home ownership via supply-side measures, these policies have since fallen out of favour and haven’t featured much since the 1970s.
Martin said Australia now “overwhelmingly” relied on demand-side mechanisms to help first home buyers.
“And unlike countries such as Finland and Singapore, Australian governments have resisted prioritising first home buyers’ genuine interests by reforming tax settings that favour their housing market competitors: established homeowners and would-be rental investors,” he said.
The report pointed to several supply-side policies governments might consider.
One was Build to Rent to Buy, a policy that would see community housing organisations build dwellings for people to rent out at affordable rates for a decade while the occupant saved for a mortgage to buy the property.
Land rent schemes were another option, where buyers essentially only acquire the building - not the land - which is instead rented or leased from the government according to the size of the block.
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