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.
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.
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.
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.
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.
The Help to Buy scheme represents a major victory for first home buyers contending with rising house prices. With the help of the government, purchasers of new homes could have their mortgage reduced by up to $380,000, making a once-impossible prospect more attainable to many homebuyers. Further, after a wave of Australians opted for seachanges and treechanges in the wake of the pandemic, buyers have been rewarded with the ability to invest in their local area, as 10,000 places of the First Home Guarantee scheme were reserved for those living in regional areas. As a result, the schemes have created more freedom for first home buyers to purchase homes that reflects their lifestyle, maintaining confidence in regional house prices as well as the metropolitan markets.
By making it a hot topic in the election campaign, the government has demonstrated how important the Australian property market is for our country's economic stability and growth. Through the above schemes it is likely that the home buyer sentiment will remain strong, which is great news for property investors. With more buyers in the market, there is more competition for properties. This makes property investing a very attractive proposition for those looking to make some good returns on their investment.
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