First home buyers beware.
The new housing deposit scheme being spruiked by both the Liberal and Labor Parties in hopes of winning your vote may lure you into buying a property you can’t really afford. And one that could still go down in value for years to come.
An election won’t save the market. Levels are going down in such a way that the promise of a smaller deposit won’t help. And while we usually find ourselves on the side of the Libs, they’re just as guilty. Failing to balance home rates for six years and then racing to get on the side of young Australians just days before the federal election is fairly transparent.
And Labor Leader Bill Shorten is again preying on the weaker subjects — first with the promised handout to early education workers — and now with the plan to one-up the Coalition’s plan for homeowners, too seems faulty.
We implore you, dear reader, to look deeper before casting your vote…
Nothing but empty promises from Lib & Labor
Prime Minister Scott Morrison announced a new scheme on Sunday aimed towards those struggling to secure a deposit for their homes.
At the Liberal election campaign launch in Melbourne, Morrison promised that under Liberal leadership, a 5% deposit, rather than 20%, would be required for home shoppers.
And just like clockwork, Labor has promised to match the plan — promising reformation of negative gearing for future purchases, according to Shadow Treasurer Chris Bowen.
But if the market continues to spiral downward, like we’ve been long predicting, and the mainstream media seems to have now discovered, these promises may be as useful as squirting a water gun on a bonfire.
Adding to his cause, Mr Morrison said a similar scheme has been running in New Zealand for several years, and has been successful.
Implementing a similar project would make ‘a big difference’ to voters, Morrison said. ‘Cutting the time taken to save for a deposit by at least half and more.’
According to the Australian Associated Press, this would allow singles earning less than $125,000 a year, and couples earning less than $200,000 to enter the housing market.
As you’d expect them to, the Property Council has called the deposit plan a ‘smart proposal’, and would boost the housing construction sector, which is already beginning to suffer.
Ken Morrison, the council’s chief executive, backed up the Coalition’s plans in a statement:
‘It will deliver some welcome assistance for aspiring first home buyers who have been confronted by the ever-increasing size of the deposit required to buy a home as the market has risen in recent years.’
Parties’ housing plan a recipe for disaster?
But while this plan may boost much-needed confidence, it doesn’t change the over-valuation of the properties they could soon be ‘affording’. And it could end up being more detrimental than ever for first home buyers.
And how will they boost the competition? By giving preference to the smaller banks and non-bank lenders, who they assure run the normal checks to assess whether these families can meet their repayments.
And that’s the danger for new home buyers who borrow $475,000 to buy a $500,000 home. If the price falls just 10%, which is more likely under a Labor government’s negative gearing policies, you’ll already owe $25,000 more than your home is worth.
And while Mr Morrison is certain that this isn’t a handout of ‘free money’, we are nervous to believe it. After all, it seems the only thing that could correct the market right now is the market itself. It’s too late for intervention.
The Coalition’s plan is set to begin next year, should they win the leadership battle this weekend. It will be an addition to the government’s first home supersaver scheme, as well as other state-based initiatives.
Proceed with care!
POLL: Who do you think will be the next Prime Minister? Visit The Australian Tribune to tell us who will take out the election in May. Click here to vote now!