Labor and the Coalition announced major housing policies on Sunday, each pitched at first home buyers and designed to get more young people into home ownership.
Here’s what you need to know if you’re looking to buy a new home.
What has been announced?
Labor has announced it will spend $10bn to build 100,000 new homes across the country, which would be reserved for first home buyers.
The party says it will work with state governments to find suitable projects and fast-track land release and planning approvals.
The plan includes measures to help first home buyers with a 5% deposit to avoid lender’s mortgage insurance, which adds about $23,000 on average to a first home buyer’s mortgage.
The Coalition says it will allow first-time buyers of new-build homes to deduct their mortgage payments from their income taxes.
There would be no limit to the size of the mortgage – or the purchase price of the home – but the scheme would only apply to the first $650,000 of a mortgage, and only apply for the first five years.
The Coalition says a first home buyer with a taxable income of $120,000 and a $650,000 mortgage would save about $12,000 a year, although the Grattan Institute chief executive, Dr Aruna Sathanapally, told ABC news it would disproportionately benefit those on higher incomes as they would have higher tax deductions.
The Greens have already proposed limiting negative gearing and the capital gains tax discounts to one property only, capping rent increases and building more public housing.
Who can apply?
Labor’s scheme would be open to all first home buyers with the ability to pay a 5% deposit.
The Coalition’s proposed tax deductions would be available to first-time buyers earning less than $175,000 a year, or $250,000 for a couple. It would only apply to newly built homes.
Couples who apply could each claim a portion of the tax benefit but not double dip.
Will these policies affect house prices?
Hal Pawson, from the Universy of New South Wales City Futures Institute, says Labor’s policies would have “some beneficial effect on overall house prices”.
“It’s not a completely transformational number [of homes],” he said.
But for first home buyers who purchase one of the 100,000 promised cost-price government-built homes, they might save 20% to 25% off the cost of a home built by a private developer. He says that is largely because banks will only lend to private development projects that have that sort of profit margin inbuilt.
The Coalition’s policy would be likely to have “some inflationary impact” but that the decision to limit the scheme to only new-build homes was “quite sensible”.
“If it’s for new-build only it’s not nearly as damaging as if it was allowed across the whole system,” Pawson says.
What impact will the policies have on the housing market?
Pawson says Labor’s plan would still leave Australia short of its aspirational target of building 1.2m new homes by 2029, outlined in the national housing accord.
But he says the idea of government constructing homes is a big deal – something that postwar governments did to push home ownership rates to record levels in the 1960s – and an intervention experts have been calling for.
“Myself and colleagues have been saying for some time that if Australian governments are serious in their aspirations to ramp up housing supply towards the 1.2m target, they will need to step up their direct contribution to its achievement,” he said.
“Intervening more directly to ensure additional construction ringfenced for first home buyers will also help.”
He said he was “quite surprised” that both parties had made “pretty big” announcements only nine days before pre-polling opens.
“They couldn’t leave it much later,” he says.
Pawson said experts had also been calling for governments address the tax settings affecting housing. He said the Coalition’s policy was “a big move” and would be the first time in decades a major change to those settings had been proposed.
“In principle allowing first home buyers to deduct form their taxable income … is a really significant alteration to property tax settings. My response would be ‘good on them’, in a way, because we do need to make some big changes to our tax settings, possibly including that one.”
Pawson said if governments were going to provide mortgage tax relief for property owners, it was logical to do that when someone was first buying a property. But it remained illogical to provide tax concessions to landlords and other homeowners which contributed to housing being more expensive.
“If the Coalition is willing to propose a major change of that kind, then bring on a much much bigger review whether that’s the sensible thing to do in the context of all the other tax settings that are mostly damaging our housing system.”
In his campaign launch speech on Sunday, the opposition leader, Peter Dutton, said the Coalition would not increase capital gains taxes and would not make changes to negative gearing.
What do Labor, the Coalition and the Greens have to say?
The housing minister, Clare O’Neil, said Labor wanted “to help young Australians pay off their own mortgage, not someone else’s”.
“Young Australians are bearing the brunt of the housing crisis and our government is going to step up to give them a fair go at owning their own home,” she said.
The opposition’s housing spokesperson, Michael Sukkar, told the ABC that the Coalition’s plan was a “massive structural change to our tax system” to encourage first home buyers into the property market.
“In Australia you only get a new house built if someone is prepared to commit,” he said. “The way you unlock supply is encourage someone to pre-commit to a new dwelling.”
The Greens said Labor’s plan amounts to “tinkering around the edges” and that the Coalition’s would “send prices into the stratosphere”.
“We won’t stand in the way of Labor’s policy, but tinkering around the edges won’t be enough to stop house prices skyrocketing because of tax handouts to wealthy property investors,” said the party leader, Adam Bandt.
“Peter Dutton’s plan is a dangerous debt trap that could push house prices to skyrocket even further out of reach of renters and first home buyers.”
What has been the reaction from industry groups and others?
Both Labor and the Coalition’s pledges were welcomed by the Master Builders Association.
“Helping more Australians into their own home isn’t just good housing policy – it’s good economic and social policy,” Master Builders’ chief executive, Denita Wawn, said of Labor’s policy.
The Coalition’s proposed tax deductions were “a positive and practical long-term incentive that encourages more Australians to build their first home and supports market-driven construction activity,” Wawn said.
Wendy Hayhurst, the chief executive of the Community Housing Industry Association, said she was “particularly encouraged” by Labor’s commitment to “unlock additional housing supply, including much-needed social and affordable rental homes”.
“This is a critical aspect of the policy that will help address housing needs across the spectrum.”