Over the weekend the Coalition and Labor shared how they would each help more first-home buyers if they win the federal election on 3 May.
Labor’s plan involves reducing the minimum home deposit for first-time buyers. The Coalition has proposed allowing first-home buyers to claim part of their mortgage repayments as tax deductible.
However, housing experts say the major parties’ election pitches could place upward pressure on property prices.
Home ownership
On Sunday, both the Coalition and Labor launched their official campaigns for the election.
Both Prime Minister Anthony Albanese (Labor) and Opposition Leader Peter Dutton (Coalition) gave speeches focused on home ownership.
PropTrack’s Housing Affordability latest index, published in August 2024, showed Australia has hit a record low of affordable homes. It found a typical household earning $112,000 would be able to afford loan repayments on 14% of the homes sold in Australia across 2023-24.
Labor's plans
Labor wants to expand the ‘Home Guarantee Scheme’ measure, first rolled out in 2020, which allows people to buy their first homes with a 5% deposit.
The scheme currently has a limited number of spots each year. If re-elected, Labor will open up the scheme to anyone buying their first home.
However, it would be capped at properties that cost up to the average price in every city and region.
Response
Matthew Bowes, a housing policy researcher at the Grattan Institute, said Labor’s plan doesn’t address the overall cost of home ownership.
Bowes said the plan will mean people saving for a house will be able to buy one “maybe a year or two earlier”.
“If you are not able to service the loan, this doesn’t change the reality that housing is very unaffordable,” he said.
Housing Minister Clare O’Neil told the ABC on Sunday the new policy won’t have a “significant impact on house prices”.
Coalition's plans
Your contribution ensures The Daily Aus can continue doing the work you love.
I want to give $10 monthly to help TDA keep doing the news.
Your details:
If the Coalition wins the election, first-home buyers would be able to deduct their mortgage interest repayments from their income tax.
The policy would apply to the interest payments on the first $650,000 of a mortgage for a “newly built home”.
Those eligible would need to be earning under $175,000, or have a taxable income of under $250,000 for a couple, when they apply.
The scheme would be in place for five years, and participants need to live in the home through that time.
Response
Bowes said the Coalition’s scheme benefits those who are on higher incomes, but not lower earners.
Australia has a progressive tax system: the higher your income, the more tax you pay.
Bowes said that someone paying off a mortgage on a high income would get a “large benefit”.
However, lower-income earners would not see a significant reduction in tax.
Taken together, Bowes said both parties’ housing policies are “demand-side” measures that could drive up prices.
“ Housing in Australia is expensive because it’s scarce,” he said.
“Until we address that scarcity, we’re going to be fighting an uphill battle on home ownership.”
Bowes said other “fundamental constraints” are causing housing strain, such as low vacancy rates and slow construction.
Supply
Housing experts and industry groups have repeatedly called for extra supply to relieve affordability pressures.
Over the weekend, Labor pledged an additional $10 billion to state and territory governments to build affordable homes that would only be sold to first home buyers.
The Coalition has previously promised to help build 500,000 homes through a $5 billion fund for essential infrastructure, like sewerage and pathways, “at housing development sites”.
