Each side offers something to first-time buyers this election, but the nature of the support is quite different.
The Coalition housing guarantee
The Coalition promises to expand its Housing Guarantee Systemalso known as his First home loan deposit system. It will increase the number of places offered from 10,000 to 35,000 per year and will reserve 5,000 additional places for single parents.
In addition, it will increase the highest purchase price for which the program can be used. In Sydney, it will rise from A$800,000 to $900,000; and in Melbourne from $700,000 to $800,000.
The program allows buyers with deposits of no more than 5% (2% for single parents) to avoid paying the mortgage insurance that is normally required for deposits below 20%. The Republic “guarantees” the other 15% to 18%.
Mortgage insurance can cost up to $30,000 on a $600,000 mortgage.
The guarantee is not a cash payment or a deposit.
Help from work to buy
Labor’s scheme will offer 10,000 homebuyers the opportunity to share ownership with the Commonwealth, which will pay up to 40% of the purchase price of a new home and up to 30% for an existing one.
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As with the Coalition’s Home Guarantee Program, eligible homebuyers will avoid having to purchase mortgage insurance from lenders. As part of the purchase assistance, eligible buyers would pay a deposit of 2% instead of 5%.
Labor’s program is for lower-middle-income people with taxable incomes of up to $90,000 for singles and $120,000 for couples, while the Coalition’s is available for singles with incomes ranging up to $125,000 and couples up to $200,000.
Condominium is not new
The report commissioned by Howard in 2004 found condominium “as essential to the well-being of Australian families today as was the emergence of the mortgage market at the turn of the last century”.
A report produced by the Grattan Institute in 2022 found that while it could cost the government money in the short term, it could save it money on rental assistance in the longer term if it allowed more Australians to access the property.
Despite many attractive features, shared ownership has remained a niche in the world due to its complexity. In the UK, less than 1% of households use it.
But co-ownership is complicated
In the Labor scheme, the Commonwealth would not charge the landlord rent on the part of the house he owned, while the landlord would be responsible for ongoing costs such as tariffs and other bills. When the house is finally sold, the Commonwealth will get its money back plus its share of the capital gain.
As in the UK, at any time the owner can “stairsbuying more of their assets from the Commonwealth, although if prices have risen since the original purchase, the cost of buying additional shares will also have risen.
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If the buyer’s income exceeds the purchase assistance threshold for two consecutive years, he will be required to repay all or part of the government’s financial contribution depending on his situation.
In other such schemes, landlords face restrictions on their freedom to renovate and sublet their properties. They may also pay more for their mortgages, as not all lenders offer their most competitive loans for such programs.
Two very different diets
Whichever party is elected, the Home Warranty program will continue (with more places under the Coalition).
Although the mortgage insurance cost loophole gives buyers a head start, most could be on their way to buying a home without it, which means they could simply to advance home purchases rather than helping those unable to buy.
While the Home Guarantee Program focuses on the barrier of deposits, the Work Purchase Assistance Program will help with both deposits and repayments.
Such schemes are complex.
Participants will need to read the fine print to ensure they are prepared for any complications that may arise later.
Read more: $1 billion a year (or less) could cut rental housing stress in half
In truth, we can’t really hope to make a dent in the housing affordability crisis without tough policy choices like reforming the tax breaks that have driven up house prices. Labor proposed such measures in 2019. Not this time.