What are City Deals and why do they matter for your home loan?

If you’ve been keeping up with news in the housing sector, you may have heard about the recent City Deals that have been announced by the Federal Government. It might not seem all that different from the current planning process to the uninitiated, but in reality this new direction could have a major impact on your home loan. So, so just what are these deals and what do they mean for the average home buyer?

The sincerest form of flattery

But just what are the new City Deals? It is likely that, for the time being, the format will take the same form as the current UK City Deals that Australia is choosing to emulate. Essentially, what this new direction will mean is that rather than having each individual part of a city planning process being separated, everything will be designed to complement one another. Rather than there being a single plan for a single industry, everyone will be working together to drive growth.

Furthermore, what makes them a “deal” is that state and local government will be incentivised to reach specific growth targets. Targets are met, the city grows, the people prosper. Everyone wins!

What it means for your home loan

But you might be thinking just how this might affect your property and mortgage personally. If the same route is followed as the UK City Deals, we are likely to see a heavy emphasis being placed upon the housing sector. It’s no secret that many of the cities in Australia are suffering a housing shortage, pushing home prices well beyond what many people can afford with their first home loan.

The City of Manchester in Britain, for example, signed a contract that included providing 7,000 new homes by 2017. If they manage to achieve this, the council gets additional funding, and suddenly there is a huge amount of housing supply for those people looking to get into the property market. This could be the solution to housing affordability in some of Australia’s most expensive cities.

Property Council CEO Ken Morrison puts it succinctly in a recent press release, describing how Australia has a housing problem and needs significant changes to fix it.

“Australia is currently running a housing deficit of 200,000 homes and we need new and sustained supply, so that we can tilt the affordability balance.”

However, this is assuming that Australia will follow the same route as the UK City Deals. There may be adaptations and changes to better suit our circumstances, but the housing focus is likely to stay.