What you need to know
The election promise that could save you thousands on your first home
Housing affordability was a key policy contest during the 2022 federal election campaign, sparking debate as to how the government can best help first home buyers enter the property market amid cost of living concerns. While the Coalition led with a policy where individuals would withdraw money from their superannuation funds to pay for home deposits, the opposition proposed a shared equity plan for homebuyers, where the government would split the cost of the property. With Labor winning the election on May 21 and a change of government underway, policy changes like the Help to Buy scheme are presenting new opportunities for first home buyers and investors, fuelling confidence in this year’s housing market.
Here are the key initiatives outlined by the Labor party, and what we know about them so far.
Help to Buy scheme: Cutting the cost of buying a home by up to 40% for 10,000 Australians per year.
The Labor party’s most ambitious election promise was the Help to Buy scheme. Similar to the Keystart program in WA and the Homebuyer Fund in Victoria, it involves the government helping first home buyers to enter the market by purchasing a percentage of the property with them, shaving off up to 40% of the purchase price and sparing the need for Lenders Mortgage Insurance.
The scheme will be available to individuals earning less than $90,000 or couples earning less than $120,000. If their income crosses this threshold, homeowners will need to start buying the property back from the government. Alternatively, if they choose to sell the property, the government will take back its share, along with any associated capital gains. The initiative is limited to 10,000 places each year, with caps on property value based on location – for example, $950,000 in metropolitan Sydney and $850,000 in metropolitan Melbourne.
Expansion of the First Home Guarantee scheme: Allowing first home buyers to purchase a home with a 5% deposit, in both metro and regional areas.
During the election campaign, Labor made it clear that the only change it would be making to the hugely popular First Home Guarantee scheme would be an extension of the policy to include a dedicated allocation for regional home buyers.
The scheme, which allows first home buyers to purchase a home with a 5% deposit, or 2% for single parents, will now also offer an additional 10,000 5% deposits to regional first home buyers, on the condition they had already lived in the area for 12 months. The initiative will be implemented in addition to the Help to Buy scheme.
Incentives for pensioners to sell: Freeing up larger homes for younger buyers
With nearly 2 million Australian pensioners currently owning their own home, the Labor party agreed to match the Morrison Government’s schemes to free-up larger homes for younger buyers by incentivising retirees to downsize. In the past, retirees have been penalised from selling because proceeds from the sale were included in their assets test, jeopardising their eligibility for a pension.
The government’s proposed solution was an extension of an existing tax break that would allow up to $300,000 from the sale of a family home to be placed into superannuation without a penalty. The second initiative was to exempt the proceeds of the sale from the assets test for two years instead of one.
Housing Australia Future Fund: Building 30,000 social and affordable homes
One of the more nation-building policy initiatives to come from the Labor party in the election campaign was the promise of a $10 billion investment fund that would dedicate its returns to building social and affordable housing across the country.
The government is forecasting the fund will make enough money to build 30,000 homes in five years.
What it means for investors
The election campaign has demonstrated how important the Australian property market is for our country’s economic stability and growth. The government’s confidence in the housing market is reflected not only in its commitment to helping more Australians buy homes, but also in the government’s own financial investment into 10,000 homes each year as part of the Help to Buy scheme. Meanwhile, the commitment to building 30,000 social and affordable homes in five years reveals that demand for new homes is showing no signs of slowing, boosting investor confidence as well.
What it means for home buyers
The Help to Buy scheme is a major victory for all Australians who want the opportunity to purchase a home, making it easier for them to purchase homes that may otherwise be out of their reach. This is bolstered by the extension of the popular First Home Guarantee scheme, which will now allow more regional first homebuyers to realise their dream. With pensioners now more incentivised to free-up larger homes for younger homebuyers, confidence is growing around this year’s housing market as these election promises become a reality.
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