Liberal vs Labor Housing Policies: What First Home Buyers Should Know

Update: May 23,2022

First home buyers have saved a lot because of the payment schemes prepared by the government, especially during the pandemic. Because of the benefits of these schemes, there was a huge increase in the number of first home buyers which means that continuing the initiative is just the right thing to do.

The Labor and Liberal parties are both pushing for their housing policy in order to solve the housing issues. "Ahead of the elections, Scott Morrison and Anthony Albanese debated over electricity prices, national security and a federal integrity" (The Guardian). Both parties also tackled the cost of living, which has become an even bigger problem for many Australians. And because each party has its design to help first home buyers, here are some of the things that you should know about their pledges:

The Coalition's Housing Scheme: First Home Guarantee Scheme

- The scheme is an Australian Government initiative designed to support eligible first home buyers to be able to purchase a home.

- The plan is to reach 50,000 people a whole year to buy a home with a low deposit and avoid lenders' mortgage insurance.

- The Coalition would allow first home buyers to access up to $50,000 of their superannuation housing.

- Will retain and expand the low deposit loan scheme, which would mean a 5 percent deposit without paying the lender's mortgage insurance. So, for instance, a home buyer would only deposit $45,000 when purchasing a $900,000 home in Sydney. The monthly mortgage repayment would be $3595.

- The income cap for $125,000 for singles or $200,000 for couples.

The Labor's Housing Scheme: Help to Buy Program

- It is a shared equity housing scheme under which eligible applicants may get a commonwealth equity contribution of up to 40 percent of the purchase price of a home and 30 percent for an existing one.

- Would allow 10,000 households per year to co-purchase a home with the government.

- The government owns 30 percent of the buyer's home, which would make the mortgage smaller. With the same example above, the buyer would pay $2460 per month.

- The scheme will no longer require homebuyers to pay Lenders' Mortgage Insurance.

- May also allow homebuyers additional stake once they can do so.

- The property purchased will have a minimum 2 percent deposit with an income cap of $90,000 for singles and $120,000 for couples.

Both housing schemes have their advantages and disadvantages. Let's briefly take a look at what it could mean to homebuyers and
the economy.

Issues with the Schemes

Experts are saying that neither scheme could be enough to address falling homeownership rates and the housing affordability crisis.

There's an issue with the supply and demand. These housing schemes would bring further demand for housing. Unfortunately, it would most likely affect housing affordability. When more people own their homes rather than rent them, the probability of rising property rises is very high, thus affecting low-income earners to find a home they can afford.

There's also some risk in terms of negative equity for homebuyers due to the rise in interest rates. Individuals with limited financial means would also have to face limited equity.

Although the guarantee and help to buy schemes would indeed help younger buyers deal with the challenges concerning home deposits, the good thing about it is that they could also help older Australians who had gone through most of their life without owning a home. However, it's also important to note that these very initiatives could put pressure on prices upwards.

The future government should direct its focus more on expanding housing affordability efforts for those who want to enter the property market in the years to come.

Update: The recent Federal Elections have revealed that Australians now prefer that Labor will form the next parliament led by Anthony Albanese.

In addition to the housing policies (shared equity), Labor policies on Infrastructure and National Disability will be the following:

Infrastructure

Labor is set to proceed with most of the Coalition infrastructure that is underway, however, there are also some plans on abolishing Coalition's new regionalisation Fund as well as funding from the invitation-only Community Development Grants program.

At the moment, the infrastructure budget for new spending amounts to $367.2 million, but there are also some plans to exceed this. "Labor pledged to put $500 million in its first budget for high-speed rail on the east coast, and at the same time, spending of $2.2 billion on the Victorian government's suburban rail loop project.

National Disability Insurance Scheme

Labor is said to review the scheme, and may also do some reforms to make sure that plans are not arbitrarily cut. Cap on staffing at the National Disability Insurance Agency or NDIA will reportedly be lifted. The Agency oversees the scheme, as well as reviews the external lawyers and consultants. The agency also streamlines the process for initial plans which would help improve service delivery in regional Australia and work with people with disability on any scheme changes in the future.

(Sources: Domain.com.au, Sydney morning herald, News.com.au)