FIRST HOME BUYER SCHEME “A SLAP IN THE FACE”

Despite the announcement to coincide with the by-elections, there are still no details available on the NSW Government’s latest scheme in which it proposes to contribute to  the cost of a first home buyer’s home in return for part ownership of their property. But  what is clear is Government’s  admission it can’t solve the affordable housing crisis for first home buyers.

The absurd proposal is a bizarre attempt to address the symptoms  of the problem, not the problem itself: lack of supply.

This proposal is not only poorly conceived, it is actually a slap in the face to first home buyers.

First, there’s stamp duty to consider. A first home buyer purchases their home with help from the  Government and pays stamp duty. The Government takes that stamp duty to refund itself for the  equity it has now taken in the first home buyer’s property. 

It creates a bizarre scenario in which the first home buyer is, in part, providing finance for the  Government to acquire a portion of their home.

For first home buyers who have waited a long time and made major sacrifices to enter the  market, this is a bitter pill to swallow, and with the median house price in Sydney now over $1  million and therefore not exempt from stamp duty, any suggestion that this will help people  overcome the stamp duty barrier is clearly wrong.

Many other questions arise too. How might the Government’s interest in a property impact a first  home buyer’s ability to secure finance from a bank? Does the Government stand to benefit from  increases in the value of the property, particularly if the first home buyer makes improvements? 

The potential pressure on family relationships poses another threat, as there is clearly an  expectation in the Government’s scheme that mum and dad will liquidate some of the equity in  their home to assist their children. 

It raises difficult questions, like what will this do to the relationship if they refuse? There are  already many expectations placed on the Bank of Mum and Dad and this proposal potentially adds  to these.

There are many ripple effects such a proposal could have which could distort the market even  more. The last thing we need is further Government intervention in a free market which  contributes to the demand side of the equation when it’s the lack of supply that is fuelling the  affordability crisis.

The timing of the scheme’s announcement, just prior to the by-elections, shows  that the NSW Government understands voters’ concerns about housing affordability.

Unfortunately, it also shows Government does not understand how to solve the problem.

First we had the property tax and now we have this equity stake scheme. Both seek to treat the  symptoms of the affordability issue without addressing the cause, which is the undersupply of  homes and Government’s addiction to property taxes.