2 weeks Ago By Millie Muroi
Both major parties have been campaigning hard on the cost-of-living crisis – and especially housing affordability – in a bid to win over younger voters. But how do these policies affect typical 30-year-old couples who might be looking for a place of their own? Labor and the Coalition have both announced demand-side policies aimed at helping first homebuyers. Credit: Matthew Absalom-Wong Labor has proposed letting all first home buyers purchase a home without having to pay lenders’ mortgage insurance (LMI) as long as they have a 5 per cent deposit, extending an existing scheme.
The Coalition has pledged its own expansion of the scheme, vowing to let purchasers with a combined income of $250,000 access the 5 per cent deposit guarantee, up from $200,000. But its marquee pledges are to allow first home buyers to withdraw up to 40 per cent of their superannuation, up to a value of $50,000, to put towards a home deposit and introduce tax-deductible mortgages. A Dutton government would let first-time buyers of newly built homes deduct interest on the first $650,000 of their mortgage from their taxable income for five years.
While many economists are sceptical about the benefits of these policies, saying they drive up demand and therefore house prices, we’ve made some rough calculations to see how three couples, all aged 30, but earning different incomes and living in different cities, could be affected by Labor and the Coalition’s housing policies. These calculations are based on some big assumptions to calculate how the policies would work in the real world, including that wages grow at 3 per cent a year, mortgage insurance costs 4 per cent of the loan value, superannuation contributions stay at 12 per cent rate from 2025-26, and super funds deliver net annual returns on superannuation of 5 per cent. We’re also assuming the couples take out a 30-year loan with 7.
5 per cent annual interest each, and there are no changes to tax bracket thresholds over the period. We also assume that the retirement age will remain 67, and we don’t account for the impact of these policies on a couple’s Medicare levy contributions. That means the modelling will not reflect your exact circumstances, financial position or outcomes.
For example, the benefit of the Labor and Coalition policies are highly sensitive to the real rate of return you receive on your super, the mortgage rate you pay over the life of the loan, and how much property values rise by, as well as your personal preferences. While we’ve assumed each couple would buy the same property in their respective cities under both Labor and Coalition governments, the benefits of the Coalition’s policies could be more significant if couples choose to buy a property that is more expensive than one they would buy if they were unable to draw down their super, and it then increases in value over time. Both major parties also have housing policies to increase supply, with Labor promising to spend $10 billion to build 100,000 homes while the Coalition plans to invest $5 billion to fund essential infrastructure such as water, power and sewerage at housing development sites.
Both parties are also promising to limit migration, which influences housing demand. Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter .
.
