Interest Rate Cap Proposal to Support First-Time Home Buyers

Australia’s leading property developers and investors have introduced a proposal aimed at assisting first-time home buyers. The initiative suggests capping interest rates at 5% and reducing deposit requirements to 5% for new homes or apartments. This scheme would be backed by a government guarantee, ensuring minimal risk to lenders. The Property Council of Australia, representing over 2,300 industry stakeholders, asserts that this plan could save buyers up to $13,000 annually, facilitating earlier access to homeownership.

Government Measures to Enhance Housing Affordability

In response to ongoing housing affordability challenges, the Australian government has announced a two-year ban on foreign purchases of existing homes. This measure aims to increase housing availability for local buyers. Additionally, the Productivity Commission has called for expedited housing approvals and greater labour market flexibility to address a significant decline in productivity within the residential housing sector.

Easing Lending Rules for First-Time Buyers

Treasurer Jim Chalmers has directed financial regulators to relax home-lending rules, particularly benefiting Australians with university debts. The Australian Prudential Regulation Authority (APRA) will allow banks to exclude Higher Education Loan Program (HELP) debts from serviceability assessments, potentially increasing borrowing capacity for first-time buyers by up to $95,900. While this move aims to assist younger Australians in entering the property market, economists caution that it may lead to higher housing prices without addressing underlying supply issues.

Industry Calls for Additional Support

The Property Council is also advocating for the expansion of existing programs, such as doubling the $3 billion New Home Bonus and the $500 million Housing Support Program. These initiatives reward states and territories that exceed housing targets under the National Housing Accord, aiming to stimulate further housing development and address the current supply shortage.

These combined efforts by the government and industry stakeholders seek to improve housing affordability and support first-time buyers in Australia.