The issue of housing affordability does not seem to be fading for many first time buyers. Individuals and families are entering the property market later in their lives with saving for a new house deposit being an ongoing struggle. If you are ready to get into your very own home for the first time, there is possibly some light at the end of the tunnel.
The Federal Government announced during the 2017-18 budget that they would be using the Super Saver Scheme to assist first home buyers fast track their house deposit. Essentially the scheme works by allowing you to sacrifice a portion of your salary into your superannuation account before tax and then withdrawing it down the track at a reduced tax rate. For many this could fill the gap between already existing savings and the price of a house deposit. Although you aren’t able to access any money from your super quite yet, you can start salary sacrificing now to be withdrawn after 1st of July 2018.
But what does this mean for first time buyers? The Super Saver Scheme is a great way to create an incentive to start saving for your first home. But ultimately with house prices continuing to rise, it may not be enough to actually buy a home without additional savings. Doing your research before you make any decisions is vital.
Should you take advantage of the Super Saver Scheme?
Ultimately, this scheme comes down to how much individuals can elect to sacrifice of their salary. With wage growth still struggling next to property price growth, it may take some time for young people to save, even if they take advantage of this scheme.
Daniel Peterson, CEO of iBuildNew, believes that that the scheme will provide a level of benefit to first home buyers, but that with everything considered the popularity and uptake may be lower than expected. There are several reasons that would stop first time buyers from electing to use this scheme. These include:
- The annual maximum contribution is capped at $15,000.
- The total amount that can be withdrawn from superannuation at a lower tax rate is $30,000, far lower than the standard deposit a bank needs to provide you with a loan.
- The complexity of the scheme when applying to withdraw superannuation savings.
- The maximum timeframe to purchase or build a new house once granted access to your superannuation is 12 months, meaning you might simply miss out on withdrawing at a reduced tax rate, and would have to pay the regular tax rate to withdraw.
As an incentive to save, Daniel Peterson believes “the Super Saver Scheme is a great way to get potential first home buyers to start seriously saving for a deposit. However, I do not see the incentive being strong enough to encourage first home buyers to take advantage of the scheme.
In theory if an individual first home buyer or single income household on $80,000 pa elects to salary sacrifice $1,000 per month into their super for a deposit they could have saved $30,000 in 2.5 years before the reduced tax is deducted. Depending on the state they could access the First Home Buyers grant of between $10,000- $20,000 (lets say $15,000) so they have just under $45,000. An average off-the-plan house and land package across Australia is $440,000 and if you assume you need 20% of the total amount (worst case) to secure a loan from a bank, the FHB will still need to save or access another $43,000.”
However, if you are purchasing your first home with another first home buyer such as a partner who also works, both of you would be able to access $30,000 from your superannuation, taking your combined total to just under $75,000.
What does this all mean when you want to buy a new house?
House prices across the country and especially in Victoria and New South Wales continue to grow, meaning that first time buyers will have to continue to save more and more in order to keep up. This is often a problem that people come to us with. Over the space of a few weeks prices can continue to creep up on established properties. If you are planning on building your own home you may be able to save some serious cash or get started sooner with a smaller deposit. Building or buying a new home can be significantly cheaper than purchasing a new home, and you can even lock in a price with a builder for 12 months (in some cases more), saving you from any pricing increases.
Additionally, if you purchase land now that is to be titled 12-18 months down the track you can lock in a 2017 price but not start paying back your home loan until 2018/19.
Still confused about the best option for you? Speak to one of our expert phone consultants about your options. With over 40 years of experience they will be able to step you through the new home building process. Call them on 1800 184 284 or book a call online.
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Zoe Langenberg
Zoe is passionate about coffee and interior design. You can find her most weekends exploring an art gallery or devouring a good book.
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