The Labor Party, which won over the Coalition Party in the recent federal elections, is set to launch a raft of policy changes to address the various concerns facing Australia’s property market, including housing affordability and availability.
CoreLogic research director Tim Lawless expects the government’s primary initiative, the Help to Buy scheme, to be popular for prospective home buyers. This is because the scheme provides low-to-middle-income-earners a more affordable access to the real estate market, creating more equality in home ownership while also opening more opportunities for employees to reside in more central suburbs.
With the government providing up to 40% of the purchase price, plus only a small deposit and potential savings on lenders mortgage insurance, helps people through the obstacles of home ownership.
However, home buyers still have to shoulder the cost of transactional fees, including stamp duties, legal fees and bank fees.
Help to Buy Scheme
Under the Help to Buy Scheme, 10,000 slots will open for owner-occupier buyers from 1 July 2022 with income restricted at $90,000 for singles and $120,000 for couples. The purchase region will determine the eligible home price caps, which is set from $400,000 to $950,000.
According to Mr Lawless, increasing building costs, the ensuing building constraints and the vagueness surrounding interest rate increases could block the interest for new homes under the new scheme.
But on the other hand, a higher interest rate, which may lead to lower prices, could make home buyers more careful of purchasing, weakening demand for the scheme in the short term.
Mr. Lawless cautions buyers who may be considering availing of the scheme to weigh the risks related to buying a property with a small deposit. he says, the housing market is expected to weaken in the coming years, so some buyers may end up with a home that is worth less than the mortgage they’re holding.
Buyers should determine if the government will shoulder its share of the downside risk if the home is sold in a negative equity environment.
While commending the benefits of the Help to Buy scheme, Mr Lawless is reminding Australians that the scheme does not address the underlying problems of home ownership, admitting that its aim is promoting home ownership rather than helping in lowering house prices.
Schemes that trigger demand can add upward pressure to home prices. With Help to Buy, the limited number of slots, together with price caps and income caps, should help curb the surplus demand that could be caused by upward pressure on home prices.
Other Housing Schemes
The new Labor government also pledged more schemes to support Australia’s housing market. This includes the Regional First Home Buyer Support Scheme, which will offer a deposit guarantee for regional home buyers with a minimum deposit of 5%, beginning January 2023.
Similar to the Help to Buy Scheme, it will be open to only 10,000 first-time owner-occupier buyers who have lived within their chosen region for a minimum of one year, with income capped at $125,000 for singles and $200,000 for couples. Caps on home prices, which will be reviewed every six months, range from $350,000 up to $800,000, depending on region.
The Labor Party also promised to set up a national Housing Supply and Affordability Council, which will:
- Lead in identifying land supply targets in collaboration with state and territory governments
- Build a housing data warehouse for housing supply, demand and affordability
- Participate in drafting town planning policies and land supply
- Present reports on government-owned land releases, rental affordability, homelessness, and the number of social and affordable homes constructed yearly
- Provide guidance on the right housing policies within all present and future city and regional deals.