Financing first home ownership: opportunities and challenges

This final Inquiry examines the challenges of financing to buy a first home. It incorporates four supporting Research Projects and focuses on socio-economic developments and policy settings that impact access to home ownership. While high house prices are often cited as the biggest challenge faced by first homebuyers, this Inquiry highlights that the problem is significantly more complex. Critically, existing policy settings are likely to have exacerbated rather than alleviated the challenge faced by first homebuyers to finance home ownership. Politically seductive measures such as first homeowner grants and tax concessions have failed to arrest declining rates of home ownership. Those first homebuyers who have been able to buy a home have made a variety of strategy and behavioural changes, including buying more affordable attached dwellings (e.g. units and apartments) that are further away from their household’s social and economic networks, and finding other sources of financing such as from parents. The Inquiry makes six key recommendations: 1. Policy to assist entry to home ownership in Australia needs bigger focus on supply side measures 2. Tax-transfer reforms are required as current policy settings disadvantage aspiring first homebuyers and benefit existing home owners 3. Policy must take into account distributional consequences (that is, they may benefit or disadvantage people from certain income groups or geographical regions) and be targeted to benefit those who may not otherwise achieve owner-occupation 4. Policy measures that assist first homebuyers need to facilitate both accessibility—the down payment constraint, and affordability—the repayment constraint 5. Policy makers need to be aware of the consequences of policy settings and avoid unintended consequences when implementing measures that are ostensibly designed to assist first homebuyers 6. Housing policy ambitions need to include other tenures, such as renting and shared equity, as legitimate long-term housing outcomes.