Chairman points to skyrocketing prices and tightening lending conditions
Skyrocketing house prices and tightening lending conditions will increase the need for government-backed lending products, according to the chairman of HomeStart Finance.
HomeStart, backed by the South Australian government, provides low-deposit and shared-equity home loans to customers who have difficulty securing a mortgage through a traditional lender. HomeStart lent a record $589 million last financial year, a 31% spike from the previous year, according to a report by The Australian.
HomeStart chairman Jim Kouts said that HomeStart and Western Australia’s Keystart were the only state government-backed lenders operating in Australia, but other states were investigating an array of financing models to help residents enter the property market.
“Our priority is supporting low- to middle-income earners to access home loans when they would otherwise have been knocked back by a traditional lender,” Kouts told The Australian. “I sense a significant policy push across various state governments to move from a ‘hand out’ to a ‘hand up’ model, with innovative financing options rather than relying solely on home buyer grants. I sense we’ll start to see more governments consider long-term sustainable options like graduate loans and shared equity for supporting people into their own home rather than short-term, one-off initiatives.”
HomeStart has helped more than 79,000 people into homes since its establishment in 1989. It differs from other lenders in that it will consider income from government supports like Centrelink payments and disability support, according to The Australian.
Other states are also taking action to help their residents get on the property ladder. The Queensland state government offers households earning less than $141,000 a low-deposit loan product, while Victoria recently launched a shared-equity program, under which it contributes to a borrower’s deposit in exchange for an ownership stake in the property.
However, economist Saul Eslake told The Australian that while government programs helped people get into the property market, they failed to address the underlying issue of affordable housing.
“The sort of concerns I have is that these schemes are papering over a bigger problem, which is governments keep doing things that inflate the demand for housing, such as first-homeowner grants, stamp duty concessions, negative gearing and capital gains tax discounts,” Eslake said. “And governments also do things that constrain the supply of housing – NSW and, to a lesser extent, Queensland, have been offenders here – like restrictive zoning and planning laws and excessive takes on the production of new housing. Ultimately, the right way to solve the housing affordability problem is to stop doing those sorts of things.”