So Labor was re-elected. What does this mean for Australia’s property market?
Labor has stated they are pouring 43 billion dollars into addressing the housing crisis. In this article, we are going to discuss how the funding will be used, and what the pros and cons of Labor’s policies are.
To briefly recap what they achieved during their first term, Labor helped over 150,000 buyers with the Home Guarantee Scheme, increased rent assistance, banned foreigners from purchasing established dwellings, and more.
Since they have been reelected, Labor has announced plans for their second term.
1. 100,000 new homes for first home buyers.
Firstly, Labor announced plans to build over 100,000 homes for first home buyers. The official announcement did not specify the timeframe, but other sources suggest eight years.
Though a step in the right direction, some experts have claimed this is not enough to meet huge demand. In fact, Australia could require over 6 times more houses for first home buyers than Labor’s target.
In the past, Labor has stated a goal to build 1.2 million homes within the next five years, but that’s not exclusive to first home buyers. First home buyers account for about 20-30% of owner-occupier loans, which is a big portion of the overall market. Therefore creating more housing for this group specifically could be well worth it. Less competition from other types of buyers would mean more Australians have the opportunity to own a home sooner.
2. Home Guarantee Scheme expansion.
Labor also announced a policy expanding the First Home Guarantee, which is currently limited in spots and income that can be earned.
When the updated policy is in effect, there will be no caps on income or spots, meaning all first home buyers can access the scheme and pay a 5% deposit with no Lenders Mortgage Insurance (LMI).
Initially it sounds great that Labor is increasing access to home buying. But there are consequences.
With easier access comes greater demand for homes, pushing up prices and making full home ownership less accessible in the long run.
3. Help to buy scheme.
Coming into effect later this year, the help to buy scheme works by the government owning part of your house, and you owning the majority of it (at least 60%). Essentially, you are co-owning your property with the government. Once you pay off your share, that’s it.
However, the catch is that a) you must be living in the home, and b) if you ever want to fully own the home, you’ll have to buy the government’s share.
Buying the government’s share will mean purchasing it at market value, not the value it was bought at. Since property tends to appreciate in price, this cost could get really expensive.
4. Faster construction.
The Labor government is also planning to fund prefabricated and modular homes, which can be constructed faster than traditional homes. As part of speedier home construction, the Labor party has also said they will spend on removing “red tape”, which refers to the formalities and paperwork that goes into building homes.
There are a lot of pros here, like increased housing availability.
However, removing the “red tape” can lead to more frequent and greater errors in construction if teams are under poor management.
There is also the risk of delays being caused by prefabricated or modular homes as it can be tougher to gain building permission compared to regular homes. Materials might also be of lower quality compared to traditional homes, unexpected costs could arise, and resale value could be lower than what the consumer might expect.
5. The advanced entry tradies training program.
Labor is putting $78 million towards training 6,000 tradies who have experience, but no formal qualifications. The idea is to get more tradies committed to the industry.
Formal qualifications can increase safety standards and lead to more work opportunities, thereby making staying in the industry an appealing option to people who have some experience, but might have left in favour of something else.
Aside from all the positives, the policy is not perfect. Considering that 6,000 only makes up around 1.5% of the total population of tradies, it’s questionable how large of an impact this would have. Should that funding have been direction towards attracting new tradies into the workforce? We’ll leave that up to you.
Overall, Labor is directing more resources into the housing market than Liberal did when they were in that position. However, the scale of the housing crisis is so large that their policies still will not be able to keep up. Nonetheless, could Labor’s plans put the Australia in a significantly more desirable spot eventually? Time will tell.
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As always, thanks for tuning in. We hope you enjoyed this article and learned something new.
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Next Step Mortgage Broking
