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The government’s 5 per cent deposit scheme aimed at boosting home ownership could push property prices higher, according to Reserve Bank Governor Michele Bullock, who said the bank would not take responsibility for the country’s house price issues.
Speaking to the senate economics committee in Canberra on Friday, Bullock said it was “possible” the scheme – which allows first home buyers to purchase a property with as little as a 5 per cent deposit without paying thousands of dollars in lenders mortgage insurance costs – would make housing more expensive.
RBA governor Michele Bullock said it was not monetary policy’s responsibility to look after housing prices.Credit: Dominic Lorrimer
“In the short term, it’s possible that housing prices might be a bit higher than they otherwise were,” Bullock said, although she noted the bank had not conducted its own analysis of the policy.
In August, the Albanese government expanded the 5 per cent deposit scheme to all first home buyers, with no caps on numbers of applicants or income limits, and brought forward the start date to October this year instead of next year.
The maximum price of the property which can be purchased under the scheme varies by location, with the limit in Sydney set at $1.5 million and the cap in Melbourne set at $950,000.
While Treasury modelling of the policy suggested it would push up property prices by a modest 0.5 per cent over six years, some economists warned the impact could be up to 10 per cent for some areas, with only a small share of home buyers who get in early likely to benefit from the scheme.
Asked by Liberal senator Andrew Bragg about the longer-term effects of the scheme, Bullock said it would depend on housing supply, which she said she was seeing “a lot of movement on”, especially in NSW.
However, when asked by Greens senator Nick McKim if the Reserve Bank “played a role in the housing price bubble” over the past five years, Bullock wiped her hands of responsibility for the country’s house prices, instead pointing to lack of supply.
“Certainly part of the way monetary policy works is through the housing market, but I would not accept that the Reserve Bank is responsible for the housing price issues in this country,” she said. “The problem is the lack of supply relative to demand. But it’s not monetary policy’s responsibility to look after housing prices.”
Asked about those comments, Prime Minister Anthony Albanese told reporters in Brisbane on Friday morning that it was an issue the government had to deal with, but that it was the result of decades of inaction.
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“The former government didn’t bother to have a housing minister for half the time they were in office, they built just over 300 houses the entire time they were there in terms of social housing,” he said.
“They then opposed the Housing Australia Future Fund, they opposed Build to Rent incentives, they opposed all the measures that we tried to get through the parliament for a long period of time.”
Bullock said while the Reserve Bank and the Australian Prudential Regulation Authority were monitoring the size of home loans relative to home values, and debt levels relative to income, there was not yet hard data on the impact of the scheme.
However, she said was unsure about concerns that home buyers would take out huge loans, risking the country’s financial stability.
“Will everyone rush in and immediately go and take 95 per cent loan-to-value ratios? I’m actually not sure they will,” she said. “Some will, but I still think a large portion will think before they borrow up to the maximum.”
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