There is a housing affordability crisis in Australia and both major political parties are shying away from addressing the root cause of the issue: supply.
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The band-aid approach taken by federal Labor, to add an additional 10,000 spots for regional Australians under the First Home Loan Deposit Scheme, lacks strategy in curbing rising costs felt now not just in big cities but also the regions.
Figures spruiked by Labor's housing spokesman Jason Clare showed prices on the Central Coast and parts of northern Tasmania had risen by more than 40 per cent, with regional Australia overall seeing a bigger price rise than metropolitan areas.
Using simple economics, adding thousands of additional people to the housing market who otherwise would not have been able to secure a deposit, won't improve affordability. It will make it worse.
This was highlighted by the Grattan Institute in a recent submission to the Productivity Commission which said: "In the end housing affordability is actually worse because additional demand drives up prices."
Adding 10,000 spots will increase demand, causing upward pressure on existing prices. That doesn't seem to be fixing the price burdens felt by a number of home buyers. The election pitch also coincides with survey results from the Property Council of Australia, which found close to 70 per cent of young people felt owning a home would never happen for them.
Other industry associations have called on government to fix the supply constraints in the market, such as working with state and territory governments to release more land for dwelling construction.
Groups such as the Australian Council of Social Service also believe current negative gearing arrangements and the generous tax system to property owners are also impacting market newcomers.
Construction is also not being built for purpose. We build big houses and apartments in the city and nothing in the middle.
Both Labor and the Coalition, through these schemes, commit to reviewing the caps placed on the deposit schemes.
But if price surges continue beyond 40 per cent, will a bank even consider offering a loan to someone who is looking to take on debt at the upper limits of their borrowing capacity?
Calculations from RateCity show if the Reserve Bank hikes the cash rate to 1.75 per cent, as believed by Westpac, a person with a $500,000 mortgage will be paying an additional $430 per month in interest repayments. That doesn't bode well for affordability, with the repayments on these schemes usually garnering more interest due to less equity being held.
Home ownership is a cornerstone of the Australian dream, but inaction from both sides of politics is pushing that dream out of reach for most.
