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FHB schemes ineffective at bringing equity to housing: AHURI

by snichols12 minute read
FHB schemes ineffective at bringing equity to housing: AHURI

Australia’s initiatives to allow first home buyers to enter the market are expensive and largely benefit existing home owners, according to a new report.

This Australian Housing and Urban Research Institute (AHURI) paper, titled Assisting first homebuyers: an international policy review, was conducted by UNSW, RMIT University and the University of Sydney researchers and explored FHB assistance programs across eight countries. 

These countries included Australia, as well as Canada, Finland, Germany, Ireland, the Netherlands, Singapore and the UK.

According to the research, FHBs account for around 20 per cent of Australia’s total annual residential property transactions. 


The paper also noted that, in the decade to December 2021, more than $20.5 billion has been invested in FHB grants, stamp duty concessions and other cash grants. 

AHURI also noted that in the four years from 2016, this lifted from $1.2 billion to almost $3 billion.

But despite the investment, the paper noted that this may not be effective in improving affordability or ownership rates. 

As highlighted by the report, in 2018, Australia had the third-lowest home ownership out of the eight countries, consistently declining since 2003. 

By comparison, the UK and Ireland – the lowest regarding ownership – recorded significant falls following the GFC, but have since seen relative momentum upwards. 

Australia was also reported as having the second-highest real house prices of this cohort, with the AHURI stats suggesting values more than doubled between Q1 2000 and Q1 2021. 

It was reported that Australia also had the highest debt-to-GDP percentage, hitting over 120 per cent during the first quarter of 2021. 

One suggestion for this overall trend in Australia’s housing market is the focus of demand-side interventions over the last two decades.

According to the report, these models are “mainly intended to enhance access to home ownership rather than to improve affordability”, thereby effectively “pushing the scope for home ownership down the income scale”. 

“The larger schemes – Keystart, Homestart, FHLDS, Homebuyer Fund – are mainly targeted at moderate-income households with good mortgage paying credentials, but that lack substantial equity for a mortgage down payment,” the report added. 

The report noted that in order to purchase a home through a 5 per cent deposit mortgage, the borrower must have an income “sufficient to support a mortgage on 95 per cent of the price”. 

“Moreover, benefiting from ‘brought forward’ access to home ownership may come at the cost of a mortgage that is relatively expensive in repayment terms – compared with what the purchaser might expect if paying the standard deposit – because repayments are set at a mid-market interest rate,” the report said.

The report also stated that without substantial changes to tax and social security that preference existing home owners over aspiring home owners, “significantly widening home ownership access cannot be achieved”. 

Last year, a report by the National Housing Finance and Investment Corporation concluded that the First Home Loan Deposit Scheme mainly benefited FHBs who could have afforded a 20 per cent deposit within two years

Speaking of the paper, NSW City Futures Research Centre’s Dr Chris Martin and report author said: “Current Australian first homebuyer assistance measures primarily act to bring forward first home purchase for households already close to doing so, rather than opening home ownership access to households otherwise excluded.”

He added that these measures “simply add to demand and push up property prices, and the amount of public funds spent on these schemes is huge – more than $20 billion over the past decade”.

However, the report also noted that, unlike the seven other countries researched, supply-side measures – schemes that could increase the number of affordable homes suitable for FHBs  – were very “thinly represented” in Australia.

“In Singapore and other comparator countries, including Canada, Ireland and England, home-ownership policy – including FHB assistance – is to some extent framed within broader national housing strategies,” the report suggested. 

“Since it lacks any equivalent overarching framework, Australia is out of step here.”

“Unlike most of the international comparison countries, Australia stands out, as it overwhelmingly uses demand-side instruments and lacks a strategic framework,” Dr Martin said. 

“And unlike countries such as Finland and Singapore, Australian governments have resisted prioritising first homebuyers’ genuine interests by reforming tax settings that favour their housing market competitors: established homeowners and would-be rental investors.”

[Related: HomeBuilder has mixed consequences: AHURI]




Sam Nichols is a journalist at The Adviser and Mortgage Business.


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