Property experts warn of ‘bandaid fix’ home guarantee scheme

Housing experts have slammed federal government’s planned expansion of the First Home Guarantee Scheme in October, arguing it could backfire by making housing affordability even worse.

The scheme allowing first-home buyers to purchase with a deposit as little as five per cent, with previous income limits scrapped and price caps raised. The expansion has raised alarm bells for many.

Rethink Group CEO Scott O’Neill said the incentive and other first-home buyer schemes were “bandaid fixes” that failed to address the greater issue of housing supply.

He said there was a high risk the scheme would push prices higher and encourage new home buyers to take on excessive debt.

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Prime Minister Anthony Albanese’s Home Guarantee Scheme has been criticised Picture: Gaye Gerard

Mr O’Neill noted that conditions were already supporting price increaseses – even without the added stimulus of a first-home buyer scheme.

“It’s going to get really unaffordable,” he said, adding that a surge in first-home buyers will put upwards pressure on prices, particularly in lower-end price points.

Mr O’Neill said there could be “15 to 25 per cent (price) growth over the next couple of years” in the price points eligible for the scheme.

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Scott O’Neill

“The unit market in general will benefit from this because the average unit price is significantly lower than the average house price.

“Any market that’s undersupplied, wherever the vacancy rates below 1.5 per cent you’re going to see growth because people fighting over the rentals, that’s pushing rent up and pushing yields up and makes the case of buying a home more attractive.”

Mr O’Neill said these type of incentives “artificially pump the market” which will lead to long-term problems.

“Both sides of government tend to deal with the demand side and never the supply side,” he said.

“The supply is the only way to get people into homes, but they’d rather go for short-term sugar hits like this that just give you easy access.

“That’s not building new homes, especially with all of the mass amounts of new people in the country.

“I do think there’s going to be long-term problems and this is going to make it even harder for those who don’t get into the market.”

Many are predicting the new home guarantee scheme will raise prices

Other experts have previously voiced concerns for the upcoming October changes.

MCG Quantity Surveyors director Mike Mortlock said supporting more first-home buyers with purchases at a time of still crippling housing shortages would just elevate prices.

He said the scheme, and any further buyer support programs, needed to coincide with meaningful reforms that would radically increase the supply of housing.

CEO of mortgagebroker.com.au Shaun McGowan said the scheme risks trapping young Australians in decades of additional debt.

“While the government’s intention to help first-home buyers is admirable, this policy could trap young Australians in decades of additional debt,” he said.

“An extra $113,000 in interest payments over 30 years is a massive financial burden that could prevent buyers from building real wealth.”

Mr O’Neill said: “It’s better to invest somewhere rather than force yourself into a temporary home that’s not your forever home,” he said.

Some experts reveal investing or renting would be preferred in the current market

Mr O’Neill said buying a home with 95-98 per cent debt would be a life changing decision.

“The cost to own this property … that’s the real risk, not the price of the property,” he said.

“It’s the massive boat anchor of the mortgage cost that will become the dominant aspect of your life.”

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