Home Guarantee Scheme: Property price expert challenges Anthony Albanese prediction on first-home buyer help

Labor has been accused of “letting the Australian dream die” with a leading real estate expert backing the Coalition’s claims that the Albanese Government’s expanded Home Guarantee Scheme would fuel property price hikes of at least 5 per cent to an already overheating market.

Australia’s home price furore has continued to escalate as the latest data from property research firm Cotality revealed middle market house prices in Sydney, Melbourne, Brisbane, Adelaide and Perth have now blown past the limits required for sales under the scheme, which came into effect on October 1.

Anthony Albanese has downplayed the Reserve Bank governor Michele Bullock’s grim warnings on Australia’s housing supply, instead arguing that his scheme to safeguard home loans for all first-home buyers with just a 5 per cent deposit would only result in a half a per cent increase on property prices after six years.

Shadow housing minister Andrew Bragg has attacked the Federal Government’s unwillingness to attack the housing supply issue while fellow Opposition frontbencher Julian Leeser argued that the plan would raise property prices by 5 to 10 per cent.

Cotality research director Tim Lawless said a 5 per cent price increase over a year, than would otherwise have been the case, was likely given first-home buyers make up more than a third of the owner-occupier market.

“We’ll probably be seeing more substantial price pressures around that middle to lower end of the marketplace, certainly because that’s where the price caps will be funnelling demand,” he told The Nightly.

“I’d sort of be leaning towards the Coalition’s estimates. That sounds realistic to me.

“I think it will be pretty short and sharp over the next 12 months. Maybe even shorter than that given the fact there’s going to be some urgency coming into the market to scoop up the most desirable properties that are still below the price caps.”

In fact, middle market house prices in Sydney, Melbourne, Brisbane, Adelaide, Perth, Canberra, Hobart and Darwin are now above limits required for sales under the fast-tracked scheme. Banks normally require 20 per cent mortgage deposits.

Typical Brisbane house prices have topped the $1 million mark, leading a national surge expected to limit the scope of the expanded government subsidies for first-home buyers in several cities.

The Queensland capital’s mid-point house price rose by 8.1 per cent to $1.062 million in the year to September 30, Cotality reported. Median house prices in Sydney, Adelaide and Perth also hit record highs.

Mr Albanese suggested the scheme would only marginally push prices up further, while downplaying the Reserve Bank of Australia chief’s assertion a day before that housing supply would take at least two years to catch up with demand.

“What the RBA governor said was common sense, which was that in two years, she spoke about, because it takes time to build a home,” he told reporters in Sydney’s gentrified inner west.

Senator Bragg said the lack of an income test meant the scheme would be open to billionaires’ children.

“Instead of fixing the housing crisis by boosting supply, Labor is letting the Australian dream die. It is cruel, mean, and unfair,” he said.

In Brisbane, the scheme is limited to $1 million properties. Previously, Brisbane’s limit was $700,000.

Adelaide - where the mid-point house price has climbed by an annual pace of 6.1 per cent to $912,084 - has had its price cap under the scheme rise from $600,000 to $900,000.

Perth house prices have gone up by 7.1 per cent to $895,089, with the price cap in the West Australian capital increasing from $600,000 to $850,000.

Sydney’s median house price rose 4 per cent to a record of $1.551 million. The Sydney limit for the deposit subsidy rose from $900,000 to $1.5 million today.

Bankstown, in Sydney’s south-west, already has a median house price of $1.488 million, slightly under the cap.

“Those areas will probably surpass their price caps quite quickly for houses,” Mr Lawless said. “Probably in the first couple of months, if you can buy around that 20km mark or buy along a train line, that’s probably going to be the most popular areas.”

Even Melbourne, a poorer performing housing market with a hated State Government investor tax, was above its $950,000 cap, revised from $800,000, with its house prices edging up by 2.5 per cent over the year to $953,454.

Half of Australia’s suburbs have a median house value equal to or below the new price caps, while 93 per cent of suburbs have a median unit value equal to or below the new price caps. That includes Sydney, where $880,777 is the median apartment price, Cotality data showed.

Mr Albanese admitted the scheme will push up prices as a result of more demand, citing Treasury modelling as he fronted the cameras in his Grayndler electorate.

“There will be a slight increase in prices,” he told reporters. “The modelling suggested a half a per cent increase after six years.”

From Wednesday, the Home Guarantee Scheme will be available to any first-home buyers no matter how much they earn, doing away with the previous $125,000 limit for individuals and $200,000 for couples.

Under the Home Guarantee Scheme, instead of having to save up for the usual 20 per cent deposit to avoid having to pay lenders mortgage insurance, the Federal Government will act as a guarantor for all property newcomers.

The PM rejected the suggestion this scheme would only see first-home buyers saddled with very high debt levels, given they had not spent years saving up for a bigger deposit.

“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,” Mr Albanese said.

Under the expanded scheme, price limits are increasing to reflect median house prices in capital cities and regional areas.

Housing Minister Clare O’Neil argued the Home Guarantee Scheme would enable a family to get into the market after spending just three years saving up for a 5 per cent mortgage deposit instead of more than a decade for the usual 20 per cent deposit.

“Ultimately, we’re in Sydney today, where it’s taking a young family 11 years or so, on average, to save up for their first home deposit. Our Government’s policy, as implemented today, will take that back to two or three years,” she said.

“This is life-changing stuff and a genuine expansion of home ownership opportunities for that generation of Australians who are facing such a different housing market to their parents and grandparents faced.”

Ms Bullock on Tuesday said it would be several years until government schemes saw housing supply catch up with demand.

“It’s going to take time. I’m not confident it’s going to make any impact in the next two years,” she told reporters.

Mr Lawless said overall housing market would still be strong even if Reserve Bank delayed its next rate cut until 2026 - as NAB and Commonwealth Bank are now forecasting.

“There are other factors that are conspiring to push prices higher. We have this ongoing underbuild relative to the past level of population growth which is also keeping a floor in the housing prices,” he said.