The Australian Government has given first homebuyers a total of $22.5 billion in the years since 1964 without any effect on lifting homeownership rates, a senate committee has heard.
In a scathing submission to the Senate’s Affordable Housing inquiry, BAML chief economist Saul Eslake criticised the government for what he said was 50 years of failure in Australian housing policy.
Eslake blamed declining affordability and changing preferences for driving down numbers of young homebuyers, with overall homeownership falling 5% to 67% as of 2011 – the lowest figure since 1954. From his submission:
The decline came in spite of lower mortgage interest rates, which averaged 7.59% in the past 20 years compared to 11.95% in the 20 years prior, and “unprecedented expenditure on grants to first home buyers”.
According to the ABS’ housing finance data last week, Australians are borrowing more to buy houses but borrowing by first homeowners hit an all-time low of 12.3% of all housing finance.
From Eslake’s submission:
Governments have … been providing cash handouts to first-time home-buyers for almost half a century. Yet, as I mentioned earlier, the overall home ownership rate has never been higher than it was at the 1961 Census, immediately before governments started going down this path; and among the age groups which are supposedly most intended to benefit from these handouts, home ownership rates have declined almost vertiginously over the past two decades.
And it’s pretty obvious why. Cash grants and other forms of assistance to first-time home buyers have served simply to exacerbate the already substantial imbalance between the underlying demand for housing and the supply of it.
It’s hard to think of any government policy that has been pursued for so long, in the face of such incontrovertible evidence that it doesn’t work, than the policy of giving cash to first home buyers in the belief that doing so will promote home ownership.
Public submissions to the Government’s Affordable Housing Inquiry are accessible here.
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