Big flaw with first-home buyer grants

PHOTO: Government first-home buyer schemes are benefiting existing homeowners more than new homeowners, new AHURI findings show. FILE

Government first-home buyer schemes are lining the pockets of established homeowners, rather than helping those trying to break into the market, new AHURI findings show.

First-home buyer schemes are lining the pockets of “speculators, landlords and established homeowners”, according to the Australian Housing and Urban Research Institute.

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Australia’s policies enable those entering the market to spend more, compared to international policies which help lower first-home buyer expenses, AHURI research has found.

Report author Dr. Chris Martin said more could be done “in restraining demand with existing owners”, with current federal and state measures stimulating demand for housing.

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“So housing prices are higher and people are taking on bigger debts,” he said.

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Dr Martin said with policies helping households already close to purchasing, as opposed to low-income earners and those with considerably less savings, house prices had risen, putting more money in the pockets of “speculators, landlords and established homeowners”.

“When we look overseas, other countries have big grants as well, but we don’t have enough policies in place to restrain existing homeowners from leveraging their housing wealth into a bigger position in the housing market,” Dr Martin said.

Dr Martin noted shared equity schemes, like those offered at a state level in Victoria and New South Wales, and now federally, as a step in the right direction as an alternative program to help new buyers break into the market.

Report author Dr Chris Martin.

First-home buyer assistance programs are helping established homeowners borrow more money to put back into the property market, instead of helping those struggling to save for a deposit.

Meanwhile, the federal government’s First Home Guarantee helps buyers with as little as a 5 per cent deposit purchase a home without paying lenders mortgage insurance.

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Dr Martin said most Australian schemes helped those with existing deposits place higher bids, raising prices of houses and allowing existing homeowners to borrow more money to put back into the property market.

Leading economist Saul Eslake has called first-home owner grants “second-home vendor’s grants” as that was where the money ended up.

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The AHURI research compared Australia’s first-home buyer assistance programs with those of Canada, Finland, Germany, Ireland, the Netherlands, Singapore and the UK.