This idea goes to the point that the last thing housing markets in the hot areas of Australia need right now is policies that create extra demand from home buyers. Already, the shortage of supply relative to that demand is seeing house prices rise as astonishing rates which is creating market risks to the economy and distortions in terms of home ownership and financial security.
This is why any policy to increase first home buyer grants or to give stamp duty concessions are misguided. Shared ownership of property with the government chipping in 25 per cent of the value is the latest hair-brained scheme to be dusted off. Such policies merely add to demand as new buyers are enticed to the market, and they have an added capacity to bid even more for a property. It is likely that buyers, armed with this new leverage, will actually bid prices higher simply because they have access to more funds.
The issue with a sellers grant would be to lower the threshold price that the seller would be willing to accept. If, for example, the expected (or auction reserve) price was $650,000, this could be made up of $635,000 plus the grant. The houses would be sold more easily.
But it must be acknowledged that even this idea is something of a band aid solution with a high cost to the budget.
The long run and meaningful ways to address housing affordability are remarkably simple. At the risk of repeating the key issues, Australia needs to build more dwellings in areas that people want to live that also have access to high quality infrastructure including transport, schools, hospitals, shops and work.
These are long run issues of course – houses and infrastructure take time to build and develop.
Which means a sellers subsidy is a short term solution that can be in place until prices moderate under the weight of new supply. Until then, and even though the sellers subsidy might sound a bit crazy, it might just work.