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The chief of an industry body has called the scheme a “bitter pill to swallow” and a “slap in the face” for first home buyers.
NSW’s proposed property equity scheme for first home buyers (FHBs) has been critcised by the Real Estate Institute of NSW (REINSW) as poorly conceived, both in benefits and potential impact.
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The program, which was announced on the eve of a by-election earlier in the month, would see buyers purchasing their first property receive deposit assistance from the NSW government in return for equity in either their home, land or the property of a guarantor.
Since details of the proposal first emerged, further information has been scant.
Tim McKibbin, chief executive of REINSW, said the timing of the scheme’s announcement showed that the NSW government understood voters’ concerns about housing affordability but that it also revealed the government had no idea how to address the issue.
“This proposal is not only poorly conceived, it is actually a slap in the face to first home buyers,” Mr McKibbin said.
He argued that without addressing the cost of stamp duty, first home buyers would essentially be financing the government’s ability to acquire equity in their home.
“A first-home buyer purchases their home with help from the government and pays stamp duty. The government takes that stamp duty to refund itself for the equity it has now taken in the first home buyer’s property,” Mr McKibbin said.
“It creates a bizarre scenario in which the first home buyer is, in part, providing finance for the government to acquire a portion of their home.
“For first-home buyers who have waited a long time and made major sacrifices to enter the market, this is a bitter pill to swallow, and with the median house price in Sydney now over $1 million and therefore not exempt from stamp duty, any suggestion that this will help people overcome the stamp duty barrier is clearly wrong.”
He added that numerous questions had yet to be answered about the functionality of the program.
“How might the government’s interest in a property impact a first home buyer’s ability to secure finance from a bank? Does the government stand to benefit from increases in the value of the property, particularly if the first home buyer makes improvements?” Mr McKibbin queried.
And he believes that the scheme’s potential market impact had not been properly assessed.
“There are many ripple effects such a proposal could have which could distort the market even more. The last thing we need is further government intervention in a free market which contributes to the demand side of the equation when it’s the lack of supply that is fuelling the affordability crisis,” he said.
“First we had the property tax and now we have this equity stake scheme. Both seek to treat the symptoms of the affordability issue without addressing the cause, which is the undersupply of homes and government’s addiction to property taxes.”
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