Increasing Affordability of Housing for First Home Buyers

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  • In ANZ’s view, while there may be certain sub-markets where bubbles are arguably present such as inner city apartments, house prices for Australia as a whole can be explained by ‘fundamentals’ — an environment of low interest rates and rising incomes as growth in housing supply has remained steady.

  • Under these circumstances, any policies which address the demand for housing in the absence of policies addressing the supply of housing are likely to result in further increases in house prices.

ANZ does acknowledge however, that rising house prices have made it difficult for first home buyers to enter the market. In particular, high house prices have created the problem of a ‘deposit gap’ for some people. There is no shortage of finance for lending but prudent lenders require home buyers to have genuine savings and to invest in the house they are buying. Policies such as Investment Savings Accounts, which allow savings for home ownership to accumulate free of tax, may assist first home buyers to bridge this gap.

1 Productivity Commission, First Home Ownership Issues Paper, September 2003.

2 To some degree, the deposit gap can be filled by mortgage insurance, which provides insurance cover to lenders for borrowers with an insufficient deposit to otherwise access loans (the cost of mortgage insurance is borne by the borrower). However, mortgage insurance, while valuable, is not a complete solution to the issue of the deposit gap.

3 Though the funds in these accounts can be put towards a broader range of good causes, such as medical and educational expenses. While it is too early to tell whether these accounts have achieved their objectives, they have become popular.

4 Their report can be accessed at

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