Hoping for a home run

AUSTRALIANS looking to buy their first home should be well versed in the differences in the major parties’ housing plans when they turn up to vote on election day, an expert has warned.

Housing policy pundit Professor Hal Pawson says Labor’s offering for first homebuyers includes everything the Coalition is tabling, with its helpto-buy program coming as an added bonus.

Prof Pawson, who leads housing research projects at the University of New South Wales and has authored books on the topic, warned a government guarantee scheme such as the one offered by the Coalition was attractive on paper but left a significant mortgage to be paid off.

The Liberal Party policy allows homebuyers to make a down payment of only 5 per cent rather than 20 per cent because the government guarantees the remaining slice of the deposit, giving banks the confidence to approve loans.

Mortgage insurance – which is paid to make up for a deposit less than the regular 20 per cent and can cost up to $30,000 for a $600,000 dwelling – is also waived under the scheme.

But while a 5 per cent down payment means prospective buyers need to save less, it’s worth keeping in mind the remaining 95 per cent still needs to be paid off, Prof Pawson said.

Through Labor’s help-tobuy scheme, the government would pay for up to 30 per cent of the property for an existing house and 40 per cent for a new dwelling, leaving borrowers with much less of the remaining property value to pay off.

“That’s something which provides a larger amount of help per property than the (Morrison government’s) lowdeposit mortgage scheme,” Prof Pawson said.

“What Labor is offering is the same as the Coalition, plus something more.

“Labor has matched that, and on top of that it’s said: ‘We’re also proposing a shared equity (scheme) called help-tobuy’.”

The caveat of the Labor scheme, however, surrounds the fact the government would own a 30 per cent or 40 per cent stake in the home, meaning homeowners would get a much smaller slice of profit assuming the value of the property rises.

“You don’t get the full benefit of tax-free asset inflation if you’re accessing home ownership with this kind of help. Government shares the benefit,” Prof Pawson said.

“It’s not as financially beneficial to you if you’re the buyer and 30 or 40 per cent of a capital gain goes somewhere else.”

Prof Pawson stopped short of declaring which policy he thought would deliver the most benefit, but said different schemes helped widen the government’s approach to tackling the housing crisis.

“It’s widening the range of ways the government is trying to help,” he said.

“That’s important.”