What a change in government means for Australia’s property market

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key takeaways

Key takeaways

The Labor party’s recent Federal Election win brought about a raft of new policy measures designed to address the property market’s biggest issues, including increasing housing affordability and making it easier for first-home buyers to get onto the property ladder.

The federal government’s Help to Buy scheme aims to assist first-home buyers with both the deposit and mortgage repayments, propelling buyers into the property market earlier and helping those who may not be able to buy otherwise.

The government will have an increasing stake in the property market and will benefit from capital growth, but home buyers can buy back stakes when they become financially sound.

The Coalition introduced the First Home Loan Deposit scheme to address affordability and home ownership constraints. Buyers can avoid paying Lenders’ Mortgage Insurance (LMI) by making a 5% deposit.

The HTB scheme allows buyers to enter the property market as much as 11 years and 5 months earlier than the FHLD scheme and reduces mortgage repayments. However, Domain recommends that homeowners dedicate less than 30% of their income towards mortgage repayments to avoid “mortgage stress”.

The Labor party’s recent Federal Election win brought about a raft of new policy measures designed to address the property market’s biggest issues.

Housing affordability and ownership have become an increasingly important issue for governments to address after record house prices pushed the idea of owning property out of the reach of many first-home buyers on low- to mid-level incomes.

Price Fall2

Sydney house prices rose 40% from the trough in June 2020 through to March 2022, providing the steepest upswing on record, Domain’s inaugural NSW Spotlight report reveals.

And while prices in many NSW areas have peaked, and are expected to fall further this year, many buyers will still find the prospect of owning a home difficult.

But the change in government and its new buyer incentives may change all that, making it much easier for many first-home buyers to get onto the property ladder.

Help to Buy (HTB) scheme

The federal government’s Help to Buy (HTB) scheme aims to assist first-home buyers with both the deposit and mortgage repayments, propelling buyers into the property market earlier and helping those who may not be able to buy otherwise.

Here’s how it works and the criteria:

  • Government helps with up to 40% of the purchase price of a new home and up to 30% for an existing home.
  • Individual applicants must earn $90,000 or less or $120,000 for couples.
  • Caps on property prices vary from $600,000 to $950,000 depending on the NSW location.
  • Have a minimum 2% deposit.
  • 10,000 available spots from July 2022.
  • Must be a first-time homeowner and live on the property.

As time goes on, the government will have an increasing stake in the property market and benefit from capital growth once the property is sold.

However, the home buyer can purchase back stakes when they become more financially sound, at a 5% minimum.

If the homeowners’ annual income exceeds the earning caps for two years in a row, they will be required to buy back the government’s stake in the property in part or whole, the report explains.

First Home Loan Deposit (FHLD) scheme

The Coalition also introduced the First Home Loan Deposit (FHLD) scheme to address affordability and home ownership constraints.

First-home buyers can purchase a home with a 5% deposit (or 2% for single parents) with the government acting as a guarantor for the remaining so buyers can avoid paying Lenders Mortgage Insurance (LMI).

There are similar minimum requirements set out in order to qualify for the scheme, including income limits and deposit requirements, and the home must be your place of residence.

Loans

The advantages

The major advantage of the HTB and the FHLD schemes are the significant differences in the time it takes to save for a deposit but the HTB scheme also assists in reducing mortgage serviceability.

In its report, Domain has calculated the time it takes to save a deposit based on the best scenario, a buyer at the upper limit of the income threshold.

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