The Property Council is pushing for the scheme to be doubled to 20,000 buyers a year for the first two years, with the additional 10,000 places restricted to purchasers of newly-built properties.
“The Property Council and our members remain keen to avoid limiting the beneficial impact of the scheme,” it said in a submission to the committee reviewing the legislation.
But the Grattan Institute’s Brendan Coates told a public hearing on Friday that while a scheme capped at 10,000 a year was “unlikely to make much of a difference” to home values, any expansion would be “counterproductive”.
“It would push up prices, benefitting sellers at the expense of first home-buyers, while increasing the risks of inappropriate lending at costs to both households and government,” he said.
Mr Coates said legislation introduced to parliament this month was “flawed” because it handed power to the government to vary eligibility for the scheme without parliamentary approval.
“As drafted, the Bill provides a blank cheque to the government to expand the size of the scheme in future without parliamentary oversight. Instead, the annual cap on the number of guarantees – 10,000 a year – should be specified in the legislation. This would ensure any policy shift to expand the size of the scheme is subject to parliamentary oversight.”
The chief executive officer of the body which will administer the scheme, the National Housing Finance and Investment Corporation, Nathan Dal Bon, told the committee on Friday that banks and other lenders had reported high interest in the scheme.
“The feedback that we have is that there is very strong interest.”
The Morrison government has said eligibility will be restricted to singles earning less than $125,000 a year and couples earning under $200,000.
Such thresholds would mean that “all but the top 10 to 20 per cent of income earners are likely to be able to access the scheme,” according to Grattan Institute’s submission.
“This is precisely the group most likely to buy a home anyway,” it adds, arguing thresholds should be set much lower – at $80,000 for singles and $120,000 for couples – to ensure help is directed to those most in need.
The executive director of the Australian Housing and Urban Research Institute, Dr Michael Fotheringham, told the committee it was unclear if the scheme would boost home ownership overall. “As currently written, I think it will accelerate people into home ownership, rather than getting more people into home ownership.”
Treasurer Josh Frydenberg reiterated on Thursday the scheme was intended to benefit “up to 10,000 first home buyers”. He also said restrictions would apply to the value of properties that could be purchased.
“The property caps, which will vary by region, will be announced by the Minister for Housing and Assistant Treasurer,” Mr Frydenberg said. “They will be set at an appropriate level to ensure that the scheme is properly targeted.”
Jessica Irvine is a senior economics writer with The Sydney Morning Herald.