First home buyer scheme leading to housing price rise
A scheme to allow more first home buyers to enter the property market could be boosting house prices.
A report published by Cotality on Thursday found that homes at the lower end of the property market and eligible for the federal government’s five per cent deposit scheme have recorded stronger price growth than higher-priced homes.
In the first six months after changes were made to expand the programme, the price of affordable homes increased by 6.7 per cent, compared to 3.6 per cent for other properties.
Under the scheme, first home buyers can purchase eligible properties under a price cap with a five per cent deposit, with the federal government acting as guarantor.
The biggest price difference was seen in Sydney; While there was a 4.1 percent increase in houses under the price ceiling, there was a 1.1 percent increase in houses above the price ceiling.
All capital cities saw higher increases in house prices below the price cap, except Canberra, where the increase was the same at 3.6 per cent.
Cotality said this was largely due to the expectation of increased competition and price pressure after the scheme was expanded in October.
This comes at a time when expectations for the work the construction industry expects to complete have fallen due to the war in Iran; This is a sign that new homes are ready for contraction.
Further work program expectations fell in every state and territory in March, the Property Council’s quarterly industry sentiment survey revealed on Thursday.
This is another failure National Housing Agreement A target of 1.2 million new homes by mid-2029.
State and federal governments have put increased supply at the center of efforts to make housing more affordable.
Property Council chairman Mike Zorbas said industry confidence was key to new supply.
“In an environment where costs are high and confidence is fragile, even relatively small increases in uncertainty can delay or halt projects before construction begins,” he said.
Diesel prices have soared and the costs of construction materials such as PVC pipes have risen as much as 36 percent since the conflict in the Middle East closed the Strait of Hormuz and disrupted global oil supplies.
According to the survey of 435 property developers, real estate agents and service providers, confidence levels fell by 19 index points to 104; This was the largest quarterly decline since June 2022.
Mr Zorbas said controversial changes to rein in tax concessions for property investors had increased uncertainty among developers and would reduce project feasibility.
But Jocelyn Martin, chief executive of the Housing Industry Association, said reducing capital gains tax relief for existing properties and making a more generous concession for new builds would encourage new supply.
“We know that around 80 per cent of the existing pool of investors are buying existing homes,” he told a parliamentary inquiry on Wednesday.
“So maybe changing the balance between new and existing might actually encourage some investors into new homes.”
Master Builders Australia policy director Melissa Byrne said another way to boost supply was to reduce the time and cost of building new homes by improving the construction industry’s productivity, which has fallen by 21.5 per cent in more than a decade.
Peter Tulip, chief economist at the Center for Independent Studies, and Matthew Bowes, senior associate at the Grattan Institute, argued that further easing zoning and planning rules to allow for denser housing would significantly boost productivity.
David Rumbens, partner at Deloitte Access Economics, argued that another productivity boost could be achieved by reforming occupational entry regulations that prevent skilled workers from entering the country or moving across borders.
“These barriers constrain the labor market’s ability to direct people to where they are needed most, restricting competition and putting pressure on productivity,” he said.
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