Will Australia's New Housing Policies Backfire? Experts Warn Of Rising Prices

Prime Minister Anthony Albanese and Coalition leader Peter Dutton announced varying housing policies as part of their election commitmments on Monday. However, economists believe that both Labor and Coalition housing policies are failing to address the basic issue of housing supply, which could lead to rising property prices.

Experts are also concerned about the Coalition's plan to make mortgage repayments tax-deductible for five years, questioning its long-term effectiveness.

Prime Minister Anthony Albanese plan involves allowing buyers to get a mortgage with just a 5% deposit, News AU reported. Meanwhile, the Coalition's promise to make mortgage repayments tax-deductible is expected to increase demand, which could push prices higher.

Coalition's tax deduction boosts demand

University of South Australia housing economist Chris Leishman said that one part of Labor's plan, allocating AU$10 billion to build 100,000 homes for first homebuyers, could help improve housing supply and reduce pressure on prices.

Meanwhile, the Coalition's housing policy focuses on demand, with no measures to address housing supply, which could lead to inflation, according to Professor Leishman. They are offering a new mortgage tax deduction scheme for first-time homebuyers earning under AU$175,000.

The scheme applies only to newly built homes, allowing buyers to deduct interest payments on up to AU$650,000 of their mortgage from their taxes. The Opposition Leader claims this will save the average household AU$55,000 over five years.

Leishman raised concerns about the long-term sustainability of the scheme, questioning whether banks would consider the tax deduction and if homeowners would be able to manage higher mortgage payments after five years.

Coalition's AU$5B infrastructure plan vs. concerns over super-for-housing scheme driving up prices

The Coalition's supply-side policy involves a AU$5 billion plan to fund essential infrastructure like water, power, and sewerage for housing developments, which they claim will help build 500,000 new homes. However, the public sector spent AU$43.2 billion last year on similar infrastructure.

Independent economist Saul Eslake warned that the Coalition's super-for-housing scheme, combined with the tax deductions, would drive up housing prices and worsen affordability. The Coalition proposes allowing Australians to withdraw AU$50,000 from their superannuation for a house deposit.

Eslake pointed out that history shows such policies tend to make housing more expensive, benefiting current homeowners while making it harder for the majority of people to own a home.

Albanese and Dutton defend housing policies

Albanese and Dutton rejected criticism from economists that their housing policies would raise prices and worsen the affordability crisis. Both leaders visited housing construction sites to promote their plans to help young Australians enter the property market.

When asked if he wanted house prices to drop, Albanese said that prices in Australia typically rise, and his focus is on improving access to homeownership. Dutton, when asked the same question, expressed his desire for house prices to "steadily increase."

Dutton's 20-year-old son, apprentice carpenter Harry Dutton, joined his father at Monday's press conference and shared his struggles with saving for a house. He mentioned that despite saving hard, it felt almost impossible to buy a home in the current market.

When asked if he would help his son buy a house, Dutton ignored the question and continued discussing why Australians should vote for the Liberal Party.