John McGrath – New help for home buyers under Albanese Government
Elections create uncertainty and people do tend to delay major decisions until after the event. So, there’s a backlog of activity that will filter through the market over the next couple of months.
Both sides of politics offered new or extended assistance packages for first home buyers – and other buyers, too – during the election campaign, so let’s take a look at the detail of Labor’s commitments.
Help to Buy program
Help to Buy is Labor’s shared equity housing policy. The Federal Government is offering to pay up to 40% of the purchase price for new homes and 30% of the purchase price for established homes – not only for first home buyers – but also people who do not own their own home currently, but may have previously.
So, under this scheme, the government will co-own your home with you.
You’ll need to contribute a minimum 2% of the purchase price as a deposit, and qualify for a loan for your equity share with a participating lender. You’ll foot the bill for all the buying costs, like stamp duty and conveyancing fees; and all ongoing costs, such as council rates, strata levies and other bills.
As time goes on, you’ll be able to increase your ownership by purchasing equity back from the government, when you can afford it, in minimum 5% lots at a time.
There will be no rent to pay to the government on its stake, you will just have to make the normal monthly mortgage repayments on the loan for your stake. The government provides the following examples to show the savings for buyers:
- For a Sydney home buyer purchasing at the price cap of $950,000 with 40% government equity, mortgage repayments would be about $1,600 cheaper per month
- For a regional Queensland home buyer purchasing at the price cap of $500,000 with 40% equity, mortgage repayments would be about $850 cheaper per month 1
Help to Buy will be open to 10,000 Australians per year. As is customary, there will be income and purchase price caps to ensure only low to middle income earners benefit from the scheme. After all, the idea is to make home ownership more accessible to a larger group of people in the community.
The income thresholds will be $90,000 for singles and $120,000 for couples. For the purchase price caps, let’s go state by state along the East Coast of Australia:
- In NSW, the price cap will be $950,000 in Sydney and major regional centres like Newcastle and Lake Macquarie, the Illawarra and Central Coast; and $600,000 elsewhere in the state
- In Victoria, the cap will be $850,000 in Melbourne and regional centres like Geelong; and $550,000 elsewhere
- In Queensland, the cap will be $650,000 in Brisbane and regional centres like the Gold Coast and Sunshine Coast; and $500,000 elsewhere
- In the ACT, the cap will be $600,000
- In Tasmania, the cap will be $550,000 in Hobart and $400,000 elsewhere.
Regional First Home Buyer Support Scheme
This scheme will pretty much operate under the same main rules as the existing First Home Loan Deposit Scheme – now renamed the First Home Guarantee – but it’s for regional buyers only.
To jog your memory, the First Home Guarantee allows first home buyers in Australia’s cities and regions to buy a new or established property (under regularly revised price caps) with a 5% deposit and a government guarantee on the rest of the 20% that the banks require for new loans.
The First Home Guarantee and the Regional First Home Buyer Support Scheme will have the same income caps of $125,000 for singles and $200,000 for couples.
In the Federal Budget handed down by the Coalition in March, the First Home Guarantee was expanded from 10,000 places per year to 35,000.
The Albanese Government will offer an additional 10,000 places under the Regional First Home Buyer Support Scheme.
While we’re on the subject of government and property, it was reported last week that the NSW Government is planning to include stamp duty reform in its upcoming budget.
The change will centre around giving buyers a choice of either paying an upfront lump sum in stamp duty or an annual land tax of a few thousand dollars instead. The idea was floated in 2020 by NSW Premier Dominic Perrottet, who was the NSW Treasurer at the time. A public consultation followed.
Stamp duty is a ridiculously expensive tax, and now so absurdly high that it disincentivises moving and punishes those that do. In a robust economy, people need to be able to relocate easily to be closer to a new job or school, or to upsize or downsize as per their life circumstances.
We’ve seen the stimulatory effect of removing or reducing stamp duty with first home buyers so we know it works. I’ll be interested to see the detail of the proposed reform in the budget.
1. Source: www.alp.org.au, based on a variable principal and interest loan at 3.7% paid monthly over 30 years