RBA Governor Michele Bullock has criticised the Albanese Government’s first homebuyer scheme suggesting its biggest impact will make it harder for these property seekers by adding to the explosion in real estate prices around the country. The Governor gave the unmissable message that this policy is good news for sellers but not so good for buyers, who should expect higher prices when they go to auctions or inquire with an agent.

In a story in news.com.au, Alex Blair reveals that new homebuyers account for a whopping 20% of new loans made by lenders, so making it easier for them to borrow is also good news for banks as well! Meanwhile, sellers will benefit from more potential buyers in the market.

In case you’ve forgotten, let me remind you what the PM said when he announced his First Homebuyer Scheme revamp in August this year: “The Albanese Labor Government is helping more Australians realise their dream of home ownership sooner, by launching 5 per cent deposits for all first home buyers early on 1 October 2025, instead of next year. Through the expanded 5 per cent deposit scheme, the Albanese Government will guarantee a portion of a first home buyer’s home loan, so they can purchase with a lower deposit and not pay Lenders Mortgage Insurance.”

The PM added: “Under the changes, all first home buyers will have access, with no caps on places or income limits. Property price caps will also be set higher in line with average house prices, providing access to a greater variety of homes. The expanded scheme means a first home buyer in Brisbane can purchase a $1 million home with a $50,000 deposit. They could save up to 10 years off the time it takes to save for a deposit, save about $42,000 in mortgage insurance, and could pay up to $350,000 towards their own loan instead of paying rent.”

While no one can argue that this isn’t done with the best of intentions, this is what Governor Bullock said: “The deposit scheme thing is more a demand side thing. We have done a little bit of work on this,” she told the House of Representatives Standing Committee on Economics.

The Governor maintains our housing problem is not access to loans or demand for properties but it’s the new supply of homes that’s too low. Undoubtedly, immigration adds to the number of potential buyers as well. “The RBA says the government’s measure is good news for current homeowners, and terrible news for the next generation of workers,” Blair reported. “RBA assistant governor Brad Jones said the policy was expected to lift housing credit by between 1 and 2 per cent.”

Treasury says help for our supply problem is on the way, but it will be a longish time coming! “The Treasury has also done some work on medium-term supply response, and their sense is that you will see, over time, an uplift in supply in response to that extra demand as well, and so that will end up dampening the price effect over the medium term,” Dr Jones said.

Unless the governments of Australia become developers, which isn’t something we need, then it’s time those governments killed the obstacles to private developers actually making more supply.

Like what? Try this:

1. The cost of regulation on developers from the three levels of government can be over 30% of the cost of building a new home. That has to be reduced.
2. Positive incentives for developers like lower effective taxes on profits.
3. Look at the impact of state-levied slugs such as payroll tax on entrepreneurs who build houses and apartments.
4. Have the guts to lean against Not-In-My-Backyard Individuals or NIMBYS, who scare politicians off from actually making more homes that young people might want to buy.

To be fair, while this example from the PM shows that his measure will help homebuyers in cheaper suburbs and towns, they’ll still pay more because there’ll be more bidders.

This is what he said: “It means that a first home buyer in Bendigo could purchase a $600,000 home with only a $30,000 deposit. They could save up to 6 years off the time it takes to save for a deposit, save about $25,000 in mortgage insurance, and could pay up to $126,000 towards their own loan instead of paying rent.”

It could be a good policy if say three years ago the Albanese Government and state governments had agreed to help builders build! But that would be an achievement of real leader, the likes of which we haven’t seen from both of our political parties in decades.