Not being an economist I propose two ways to improve the environmental and social value of Australia’s existing housing stock using the proposed First Home Buys Scheme.
I’ve been waiting a few years for a cap to be announced on the value of new homes that can be purchased under the scheme. It has been demonstrated recently that first home buyers have been using the scheme to further leverage their borrowing to buy more expensive homes. This is evident in the new loans now costing 7 times a borrowers gross income up from 3 times in the mid 80’s.
So can this be used for the greater good? Yes.
Now that a that a cap has been introduced it opens two avenues for manipulating the housing market.
1. The proposed cap of $600,000 for Victorian homes could be extended to $650,000 for existing homes which are demonstrated to have a 6 Star energy efficiency and to $700,000 if existing homes are upgraded to the new accessible housing guidelines which assist in making home more liveable for our elderly population.
This would only really affect buyers and sellers in the $500,000 to $700,000 range. Yet, these people are probably best financed to make home improvements which would take advantage of the first home buyers desire for larger more expensive homes.
2. The second option is to provide additional grants to home buyers who purchase 6 Star and accessible homes. This would encourage sellers to upgrade their houses in order to capitalise the additional funds available to buyers.
It is also likely that upgraded houses would sell faster and demand better prices given the larger deposits available to buyers.
I see this option as affecting much more of the housing market but probably won’t generate as much demand for improvement given the smaller amount of money on offer.
I leave the comments open to my financially minded readers. But see that any incentive that leads to buyers and sellers demanding energy efficient and socially responsible housing and a plus for society as a whole.