Labor frontbencher Tanya Plibersek has declared there’s “never been a better time” to be a first-home buyer in Australia amid a drop in house prices.
In the wake of rising interest rates and major tax changes in the budget impacting property investors, the government is doubling down on the impact of the changes.
Speaking on Channel 7’s Sunrise, Ms Plibersek repeatedly clashed with host Nat Barr over whether the goal of the changes was to see the value of Australian homes decline.
“There’s never been a better time to be a first-time buyer,” Ms Plibersek said.
“Not in my lifetime has there been a better time to be a first homebuyer in Australia.”
Ms Plibersek was speaking after new data revealed that an increasing number of high income earners are accessing the 5 per cent deposit scheme after income means testing was removed.
“I’m so happy to see more than 260,000 individuals and couples have made use of our 5 per cent deposit,” Ms Plibersek said.
“That means probably a quarter of a million households or more that would not be in a home of their own if it wasn’t for the backing that we’re giving first home buyers.”
Barr then observed that the problem was that house prices at the top end were falling in some states and entry-level homes were going up.
“Sydney, Melbourne and now Brisbane is falling. Is that what you wanted?” Barr asked.
“Well, we want people in a home of their own. And that’s what we’re seeing,” Ms Plibersek responded.
“We’re seeing at auctions right across Australia first home buyers bidding for a home of their own and I think that is fantastic. You know how hard it is to save a 20 per cent deposit if you’re paying rent in Sydney? It was impossible.
“We were locking people out of the housing market. Now they’ve got a shot at doing what their parents and their grandparents took for granted. I think that’s amazing.
“And I think there’s a generation of young Australians who are feeling this enormous sense of relief.”
“And now the market’s going down,” Barr interjected.
“As a government we’re keeping that promise. Well, you know Nat, you know what?’’ Ms Plibersek said.
“You’re talking about tiny movement.”
Nationals leader Matt Canavan said that “tiny movement” was going to see people who bought a home with just 5 per cent equity go backwards.
“Take a deep breath. You know, people buy a house, they keep it for seven years, 10 years, for 30 years,” Ms Plibersek said.
“You know what? If you’re a first homebuyer, this is the time that finally we have kept our promise to you as a nation that you will have a piece of our prosperity as a nation.”
Mr Canavan said the comments were an example of “why this government is so out of touch with people”.
“Because that’s not what I hear from young people. Inflation is through the roof,” he said.
“Inflation is the highest in the developed world. Our interest rates have been the highest in the developed world. How in the hell can you sit there and say this is the best time to be a first homebuyer? Economic conditions are very tough for people.
“Houses aren’t even selling. No one benefits if no homes are being sold or very few are being sold, first home buyers included.”
Speaking on ABC Radio, Treasurer Jim Chalmers was asked about new data from Cotality showing prices fell by 0.7 per cent nationwide in July.
“Well, the budget assumptions were that over the course of the next couple of years we will see prices continue to grow, but a bit more modestly than they have been,” the Treasurer said.
“There’s a whole range of factors playing out in the housing market. Interest rate movements earlier this year, higher fuel costs that we’ve been talking about, the hit to confidence from the war in the Middle East, as well as changes in the budget. And so all of those things together are playing a role here, not just one factor or another.
“It’s not uncommon to see prices come off in this fashion. If you look over the past couple of decades, even if we’ve had over that period a period of extraordinary price growth.
“Housing is a long-term investment. People don’t make investments in housing from day to day or week to week, month to month, and so from time to time you will see movements in prices like these.”
House prices are falling in Sydney, Melbourne and Canberra as the market confronts the perfect storm of rising interest rates and the Albanese Government’s crackdown on landlords’ tax breaks.
Despite Treasury predictions that the reforms will only contribute to a 2 per cent reduction in house prices over the next few years, Cotality’s Home Value Index has found that prices fell by 1 per cent in Sydney and Melbourne in the month of June alone.
“The downward revision reflects a market that is changing rapidly,” said Cotality research director Tim Lawless.
“Most regions have seen values revise lower over recent months, with the largest downgrades occurring in Perth and Brisbane.
“Higher cost-of-living pressures, deeply pessimistic sentiment and a further dampening of demand via property taxation changes announced in the federal budget are all contributing to weaker housing conditions.”
Asked how much of that drop could be attributed to the budget changes, Mr Lawless said it was a complex question.
“The reality is that it is impossible to segregate the influence of the budget from other factors impacting the market,” Mr Lawless told news.com.au.
“We are in an unusual situation where there are a multitude of factors at play.
“Affordability and serviceability constraints are rife, interest rates are elevated against a backdrop of a heavily indebted household sector, confidence is holding in deeply pessimistic territory, and now we have some downwards influence on demand from the federal budget.
“Housing conditions were already weakening well before the budget, with Sydney and Melbourne home values falling before May 12 while the mid-sized capitals were clearly losing momentum.
“We are expecting investment demand will reduce sharply due to the budget changes to negative gearing and capital gains tax.”
In Sydney, prices are now down by 3.2 per cent in the last quarter and by 2.6 per cent in Melbourne after being largely flat over the last year.
By comparison, prices were largely flat in Brisbane, but that result was off the back of a whopping 17.4 per cent increase in the last year.
However, the real impact is still unfolding as investors react to the changed conditions.
“Housing outcomes over the coming years will depend a lot on macro factors like the path of inflation and interest rates, as well as how active investors are or aren’t, and also the participation from first home buyers and other segments of the market,” Mr Lawless said.
Auction clearance rates in Sydney have also fallen to the lowest since April 2020, and have fallen in Melbourne to 2021 Covid lockdowns levels.