The low down from Max Chandler-Mather

What the experts say: 

“Stimulating demand drives up prices and makes housing more expensive for everyone”, Peter Tulip – Economist at the Centre for Independent Studies 

“Governments may fuel an ‘assistance spiral’ where the assistance makes house prices more expensive by increasing demand, prompting governments to increase assistance, pushing up prices further and on it goes”, Productivity Commission Report

The details:

• The scheme will lock out 99.8% of the people it is supposed to help
• Only 10,000 out of over 5 million will be able to access it – 0.02% of adult renters
• Purchase price cap is $950,000 but Sydney average dwelling price is $1.2 million
• Income limited to $90,000 for individuals or $120,000 as a couple.
• Max borrowing capacity is approx. $357,000 for $90,000 income with HECS debt
• Loan needed to buy a $950,000 home is $665,000 

What does this mean?

• People earning $90,000 can’t qualify for a big enough loan to pay the difference
• Even if they somehow could, the mortgage repayments would be 71% of income, causing severe mortgage stress.

What if you get a pay rise?

• If income goes over $90,000 pa, they become responsible for paying back the 30% the government loaned as well.

Has it ever been tried before?

• NSW Govt trialled this scheme offering 6,000 places but only 503 were taken up
• Showing it is a failed policy idea.

How can we make housing affordable for everyone?

• By phasing out negative gearing and ending the capital gains tax discount handouts for property investors that deny millions of renters a chance to buy a home.
• Make housing affordable for renters by freezing and capping rental increases.
• Establish a Government-developer to build good quality homes to be sold and rented out at prices below market rates that people can afford.

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