On the back of Scott Morrison’s pitch for the young vote less than a week out from the federal election, one prominent network CEO believes the Coalition’s plan to underwrite home loan deposits for 10,000 first home buyers will inadvertently disadvantage the very people it is designed to help.
CEO of Starr Partners Douglas Driscoll said that reducing the deposit FHBs need from 20 per cent to 5 per cent could see them drowning in debt.
“Under the Coalition’s last desperate roll of the dice, first home buyers will only need a 5 per cent deposit for a mortgage, compared to the usual 20 per cent,” Mr Driscoll said.
“However, this is a short-term gain that might lead to some long-term pain, in my opinion. Although it makes it easier to buy now, it also potentially burdens them with larger monthly repayments and the prospect of having to pay thousands more in interest to the bank over the life cycle of a loan. Ultimately, we want the younger generations to have a grasp on the property ladder — but at the same time, we don’t want to see them drowning in debt.
“APRA ha[s] been advocating more prudence and have long cautioned against low deposits, and yet, this policy seems to directly contradict that advice. Australians have the highest, or near highest, level of household debt in the world, which is something we cannot continue to ignore.”
He said both the Coalition and Labor are missing the point.
“In the final days that they have left to scramble for votes, both the Coalition government and Labor are focusing on the wrong elements to improve accessibility to home ownership, with both suggesting band-aid solutions.”
He also questions the timing.
“Is this a really sustainable policy or merely a tactic to garner last-minute support? And, how can Labor commit to matching the scheme within hours of its announcement? Surely, macroeconomics is a very complex issue that requires a great deal of detailed strategic analysis that takes weeks, not hours,” Mr Driscoll said.
“Modern politics has basically become a popularity contest and, unfortunately, the Liberal Party’s pitch to young voters is not about the long-term vitality of the property market. By cutting the time it takes to save for a deposit by at least half or more, as they said they would do, they’re attempting to appeal to a disengaged audience.
“Labor’s negative gearing policy is divisive and does not hold the solution, either. The narrative that negative gearing concessions only benefit the wealthy is factually inaccurate, as more than half of beneficiaries have a taxable income of under $80,000 per year.”
Mr Driscoll said it’s “high time” bilateral discussions between the main political parties are undertaken, with a long-term view of how to solve the housing affordability crisis.