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Research released by the Australian Housing and Urban Research Institute (AHURI) has suggested that first home owner grants and a long stretch of low-interest rates have made it more difficult for first home buyers (FHBs) to secure their first home.
As such, AHURI has outlined that there are “smart policy options” that the government can move to implement in order to support more FHBs to achieve home ownership.
Undertaken for AHURI by researchers from the University of Sydney, University of NSW, Curtin University and RMIT University, the research Financing first home ownership: opportunities and challenges, brought together results from four supporting research projects to examine the difficulties Australians face when financing to buy their first home.
It found that FHBs are becoming increasingly more reliant on parental help, such as a financial gift, inheritance or living rent-free in the family home, which has led fewer younger Australians moving into the property market.
According to the research, the average age of buying a first home increased from 26 years in the late 1960s to 31 years in the mid-2010s.
University of Sydney Professor Stephen Whelan said that although elevated house prices are often attributed as the biggest challenge faced by FHBs, their inquiry highlighted that the problem is “significantly more complex”.
“Critically, we found existing policy settings are likely to have exacerbated rather than alleviated the challenge faced by first home buyers to finance home ownership.
“Politically seductive measures such as first home owner grants and tax concessions have failed to arrest declining rates of home ownership over time,” Professor Whelan said.
The inquiry pointed out several areas where government policy could help with home buying, such as more emphasis on supply-side measures, for example, making homes more accessible and affordable.
“Policy settings in Australia have focussed almost exclusively on demand-side measures that boost first home buyers’ purchasing power, such as first home owners grants and stamp duty concessions,” Professor Whelan said.
He suggested that a “mix of supply-side and demand-side” approaches would be more beneficial for households who otherwise would not be able to afford a home.
Such supply-side measures the research outlined included:
• Tax-transfer reforms that do not disadvantage FHBs; reforms such as abolishing stamp duty for FHBs are a step in the right direction;
• Addressing key challenges around saving for a deposit and maintaining repayments as house price increases have surpassed wages growth, thus increasing the time it takes to save for a deposit and;
• Encouraging new types of long-term home tenure.
On the last point, Professor Whelan stated that government housing policy ambitions must expand to include longer tenure alternatives such as rent to buy, shared equity and affordable renting, along with social rent.
“Policy intended to assist first home buyers must be carefully designed and be aware of any incentives they create and the potential for unintended consequences,” Professor Whelan concluded.
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