Saturday’s (21 May) federal election brought with it a new government, with the Albanese-led Labor party winning power from the Coalition, bringing with it a raft of policy changes.
The incoming government is set to implement a range of initiatives that aim to address the biggest issues facing Australia’s property market, including housing affordability and availability.
The “Help to Buy” scheme, the government’s main initiative, is one that CoreLogic research director Tim Lawless anticipates to be popular for prospective home owners.
This, Mr Lawless believes, is due to the scheme’s ability to provide low- to middle-income earners with a more affordable entry into the property market, paving the way for greater equality in home ownership while simultaneously creating more opportunities for workers to live in more central locations.
“Being able to share up to 40 per cent of the purchase price with the government, along with only a small deposit and opportunity to save on lenders mortgage insurance, helps to overcome several of the hurdles of home ownership,” he said.
“Keeping in mind buyers will still have to fund their transactional costs, including stamp duties, legal costs and bank fees.”
The “Help to Buy” scheme will see the newly elected federal government help with up to 40 per cent of the price of a new home or 30 per cent for an established abode with the prospective buyers covering the remaining costs, which may include a deposit of as little as 2 per cent.
A total of 10,000 spots will be available to owner-occupier buyers under the scheme from 1 July 2022, with income capped at $90,000 for individuals and $120,000 for couples. Eligible property price caps vary from $400,000 to $950,000 depending on the purchase region.
Mr Lawless notes that rising construction costs, the resulting building constraints and uncertainty around interest rate rises could hinder the uptake of new homes under the scheme.
“Having said that, a higher interest rate environment, which may see lower prices, could make people more cautious of buying, reducing demand for the scheme in the short term,” he said.
“Historically, residential transaction activity correlates with property price movements. Additionally, we have just been through a period of significantly elevated transaction activity, including from the first home buyer cohort, where many home purchasing decisions were likely brought forward to take advantage of the swathe of home buying grant and incentives over 2020 and 2021.”
Mr Lawless does warn buyers who may be contemplating using the scheme to consider the risks associated with purchasing a home with a small deposit.
“With the housing market probably heading into a downturn over the coming or years, some buyers may find their home is worth less than the debt held against it,” he said.
“It’s important to know if the government will share in the downside risk if the property is sold with in a negative equity situation.”
He points to the KeyStart Loans scheme currently in place in Western Australia for buyers searching for an insight into the outcomes of a shared equity scheme in a declining market. According to data made available by the West Australian government, the number of defaults on KeyStart loans did rise from 0.92 per cent to 1.21 per cent between January 2017 and September 2019.
However, it is important to remember that that number remains relatively low and that the scheme has positively impacted thousands of lives by allowing them to enter home ownership.
On another note, Mr Lawless did commend the “Help to Buy” scheme for its potential to aid thousands of Australians enter home ownership, while concurrently raising the fact that the scheme does not fix the underlying issues of home ownership, conceding that it emphasises home ownership rather than placing downward pressure on housing prices.
Even so: “It is also worth considering any demand-side incentives can add upward pressure to home prices. For this reason, the limited number of places in this particular scheme, along with price caps and income caps, should help to contain some of the excess demand that could result in upward pressure on prices,” he said.
The incoming Labor government has also promised several other schemes to support Australia’s housing sector. This includes the “Regional First Home Buyer Support Scheme”, which, from January 2023, will see the government provide a deposit guarantee for regional home buyers with a deposit of at least 5 per cent.
Like the “Help to Buy” scheme, it will be available to 10,000 owner-occupier buyers who have previously never owned property and have lived within their select region for at least a year, with income capped at $125,000 for individuals and $200,000 for couples. Property price caps, which are subject to review every six months, vary depending on region but range from $350,000 up to $800,000.
Anthony Albanese’s party also aims to establish a national Housing Supply and Affordability Council, which will aim to:
- Take leadership roles in setting land supply targets in consultation with state and territory governments.
- Establish a housing data warehouse focused on housing supply, demand and affordability.
- Advise on town planning policies and land supply.
- Report on government-owned land releases, rental affordability, homelessness, and the number of new social and affordable homes built annually.
- Advise on appropriate housing measures within all current and future city and regional deals.