Will the policies proposed by the Labor, Liberal and Greens parties help housing affordability?
During all the years I’ve worked in finance, housing affordability has been an issue that’s raised its head every now and then – but this is the first time it’s been part of the national agenda for years at a time. We’ve talked about affordability almost nonstop since Anthony Albanese became prime minister in May 2022, and it’s been one of the key issues of the 2025 election campaign.
In any market – whether it’s housing or bananas – when people say prices are too high, what they’re really saying is demand is too high relative to supply. So any policy that increases supply will put downward pressure on prices and make the product in question more affordable; conversely, any policy that increases demand will have the opposite impact.
The policies proposed by the Labor, Liberal and Greens parties are likely to increase demand relative to supply, making housing less rather than more affordable.
Labor and Liberal plan to expand the Home Guarantee Scheme, in order to make it easier for first home buyers to enter the market. At first glance, this would seem to make housing more affordable. However, if you create a scenario in which more first home buyers end up competing for the same number of properties, you actually push up prices.
The same goes for the Liberal plans to let owner-occupier first home buyers tap into their super and deduct their mortgage interest from their taxable income. These policies will increase demand without increasing supply, and therefore make housing more expensive.
The Greens plan for lower interest rates sounds great in theory, but will, again, increase demand without increasing supply, which will only push up prices.
The Greens plan to eliminate negative gearing will drive investors out of the market. In the short term, this will reduce the supply of rental properties, and therefore push up rents. In the longer term, the supply shock will be even greater because developers will have less incentive to build apartments, which are often marketed to investors.
If our politicians want to reduce property prices and rents, they should stop introducing policies that fuel demand and instead focus on increasing supply, by building enormous numbers of new homes.
About the Author – Alex Veljancevski is a Sydney mortgage broker with Eventus Financial, which assists first home buyers, investors, upgraders and borrowers seeking to refinance to a better deal on their home loan.