EDITORIAL: Home guarantee scheme will worsen price crisis

The expansion of Labor’s First Home Guarantee Scheme will drive up house prices and push the Great Australian Dream of property ownership even further out of reach.

The banks know it. The RBA knows it, with assistant governor Brad Jones this week warning it would put “upward pressure on house prices”.

Wannabe homeowners know it. They’re flooding in now, trying to get into the market before it heats up too much more so as to be completely unattainable.

Real estate agents know it and are rubbing their hands together with glee.

Even Anthony Albanese knows it.

At a press conference on Wednesday to spruik the expansion of the scheme, which allows first-home buyers to buy homes with deposits as low as 5 per cent without having to stump up for lenders’ mortgage insurance, the Prime Minister acknowledged what common sense would dictate: that any initiative that stimulates demand without doing anything to increase supply will have the inevitable consequence of making that in-demand commodity more expensive.

Mr Albanese cited Treasury modelling that indicates a 0.5 per cent increase after six years.

The experts are warning it will be greater than that.

Cotality research director Tim Lawless said a 5 per cent price hike — on top of what already would have been — is more realistic.

And the impact will be concentrated at the bottom of the market — the segment most likely to be targeted by prospective first home buyers. The few homes in Australia that are still somewhat affordable will become less so as a direct result of the expansion of this scheme.

So why is the Government doing this at all?

Housing affordability, or the lack of it, is front of mind for Australians. Those who are yet to break into the market worry they’ll never be able to. Parents and grandparents worry for the younger generations.

The Government need to be seen to do something. So they do, even in the knowledge that it is only going to exacerbate the housing crisis, and deepen the divide between Australia’s haves and have-nots.

If you needed any proof as to just how fundamentally flawed our nation’s housing market is, look to the fact that the expansion of the scheme — which to remind you, is for first homebuyers — will raise the eligibility price cap to $1.5 million.

It’s an astronomical sum for anyone to consider paying for a home, let alone a first homebuyer.

Is it advisable for a young person or family to saddle themselves with such enormous debt?

Mr Albanese waved off those concerns.

“No, because instead of paying someone else’s mortgage, for year after year after year, their mortgage is being paid and their debt on that mortgage is being reduced,” he said.

That is true. Home ownership remains the key to financial security — and all the wellbeing benefits that come along with it — in this country. So long as that remains the case, young Australians will continue reaching for that goal, even as it recedes further into the horizon.

Responsibility for the editorial comment is taken by Editor-in-Chief Christopher Dore.