Housing affordability needs more than short-term fixes

Housing affordability is topping the national agenda in the countdown to the federal election, however, policies from both political parties could contribute to upward price pressure, according to Australia’s most iconic real estate brand.

LJ Hooker Group Head of Research, Mathew Tiller, said while it is encouraging to see housing policies take centre stage in the lead up to the Saturday 3 May 2025 poll, there is a mismatch between short-term buyer assistance and long-term supply response needed to shift affordability.

In a review of Labor and Coalition policies, he believes many of the proposals are too focused on stimulating demand. This includes Labor’s expanded 5% deposit guarantee and the Coalition’s mortgage interest tax deduction aimed at assisting first home buyers.

“History and economic modelling suggest that such policies, when applied in markets with tight supply, can contribute to upward pressure on prices, especially for entry-level homes,” Mr Tiller said.

“To meaningfully address Australia’s housing affordability and supply challenges, we believe any effective policy response must focus on two key areas: building more homes and reducing the tax burden on housing.

“More homes of all types need to be delivered in the right location near major transport corridors and employment hubs. We need to make better use of inner and middle ring suburbs with more low-rise developments, with detached homes in the outer suburbs and regional centres.”

While both parties have acknowledged supply issues, the proposed solutions remain constrained by labour shortages, construction costs, and planning hurdles.

Mr Tiller believes reducing red tape and accelerating building approvals are essential, particularly for well-located medium-density developments.

Attracting more tradespeople into residential construction through education, training, and migration is also essential. Directly investing in housing projects, especially in areas unlikely to attract the private sector, is also another option.

“The Coalition's $5 billion infrastructure fund and restriction of tax incentives to new builds may have the most direct effect on new housing supply,” Mr Tiller said.

“Labor’s plan to build 100,000 homes for first home buyers and deliver 1.2 million homes through the Housing Accord is ambitious but depends heavily on state-level execution and industry capacity.”

Housing remains one of the most heavily taxed sectors in the Australian economy, with stamp duty, development fees, infrastructure charges, land tax, council rates and GST on new construction.

Mr Tiller said from planning and development through to purchase, there are taxes, levies and charges imposed at nearly every stage and across all levels of government.

“Labor’s policies reduce upfront costs, eliminating mortgage insurance and lowering deposit requirements, making it easier to enter the market, while the Coalition’s policies aim to reduce ongoing costs through tax deductions and super access,” he said.

“However, unless housing supply grows in parallel, increased affordability at an individual level may simply translate to higher prices across the market.”