Federal home loan scheme creates few ‘additional’ buyers

The federal government’s home loan guarantee scheme has brought forward existing demand rather than boosting it by enabling people who could not otherwise buy property get a foot on the housing ladder, a key report into the housing subsidy system says.

Demand has outstripped the 30,000 places offered under the Federal Home Loan Deposit Scheme and the related New Home Guarantee, which allow first home buyers to purchase with only 5 per cent of the property’s value – as the Commonwealth guarantees the remaining 15 per cent needed to make up a typical deposit.

But the vast majority of people taking up guarantees offered in the first two years of the scheme were those would have saved a full deposit within an extra year or two and any expansion of the scheme should focus on people most in need of assistance, the Statutory Review of the Operation of the National Housing Finance and Investment Corporation Act 2018 says.

“The limited evidence available indicates that the [scheme] has mostly brought forward buyers who would have entered the property market relatively soon, rather than buyers who would have otherwise struggled to enter the market at all,” the review authored by former KPMG senior partner Chris Leptos says.

Mr Leptos’ review of the act overseeing the scheme as well as the National Housing Finance and Investment Corporation makes clear that in Australia’s federal system that splits responsibility between the Commonwealth and states, the efforts to improve housing affordability were making a difference.

“The NHFIC Act has been a singularly significant and successful intervention by the Commonwealth, in an area where responsibilities between the Federal Government and other levels of government are not neatly aligned,” Mr Leptos said.

But with evidence that more than 75 per cent of scheme participants were “accelerated buyers” and just 12 per cent were lower-income “genuinely additional buyers”, more targeted interventions were needed, the review said.

The review also said any expansion of the scheme should be done in a way so as not to threaten the viability of the lenders mortgage insurance sector, which made it possible for far more first home buyers than the annual 10,000 scheme participants each year, to buy their first home.

Housing minister Michael Sukkar said government would consider the review’s recommendations.