In today's budget announcement, the federal government introduced measures set to improve housing affordability across Australia and bring the dream of homeownership within reach of first homebuyers.
“Homeownership is fundamental to the Coalition,” Mr Frydenberg said in the budget speech.
“Helping more Australians to own a home is part of our plan for a stronger future.”
The government has pledged an additional $2 billion to the National Housing Finance and Investment Corporation (NHFIC) to provide low-cost financing for 27,500 dwellings, especially for young borrowers. This will decrease the required deposit amount to as little as 2%. This new funding directly follows the $500 million boost announced in December to support 2500 dwellings.
The announcement confirms that housing affordability will be a crucial election issue this year. The new measures will also improve the existing First Home Loan Deposit Scheme (now called the Home Guarantee Scheme), initially capped at only 10,000 places from 1 July 2021 to 30 June 2022.
The 2022 budget has expanded to include 50,000 guarantees per year for three years from 2022/23. It will continue at 35,000 a year after that. Furthermore, an additional 10,000 places would be available in regional areas for first homebuyers under the Regional Home Guarantee. This comes as a huge respite for the real estate market, which has been struggling in the past couple of years. Under the scheme, home seekers can do without the 20% deposit usually required by mortgage lenders. Instead, they can receive up to 15% of the loan's value, essentially helping them avail of a house with only a 5% deposit. Although this is a welcome move, it still falls short of more than 150,000 first home-purchasers in 2021.
Being in the green, the Family Home Guarantee scheme is also set to empower single parents to enter the real estate market with a deposit of just 2%. The number of places is set to increase from 10,000 to 20,000, spread over four years (5000 per year).
Other key spendings include $1.6 billion in funding for the National Housing and Homelessness Agreement. This will address homelessness and support access to affordable, safe, and sustainable housing.
Family Home Guarantee Eligibility
To be a successful applicant in the Family Home Guarantee scheme, aspiring homeowners must meet the following key criteria:
- Being an Australian and single parent with at least one dependent child
- At least 18 years of age
- Taxable income of up to $125,000 per annum
- No property must be currently owned
- Must be owner-occupier of the aspiring property and not just an investment.
For the Regional Home Guarantee scheme, only permanent residents are eligible.
What Is The Expected Impact?
The changes are expected to significantly decrease the total time needed to save a deposit for new homes. Currently, it takes an average couple about 8 years to save a 20% deposit in Sydney.
In the past, experts have touted such schemes to be counterproductive in the long run as they can put upward pressure on house prices. They opine that in the end, they may only end up helping the ones who qualify in the end.
However, this may not be entirely the case here as easy access to houses will push the prices up by some extent, but not by the same amount as the value of the loan guarantees. This essentially means that the scheme will bring down property prices to some extent, but it would not be enough to combat the rising costs induced by the pandemic and lack of housing supply.
Nevertheless, the relief announced in the budget is set to be a boon for aspiring first homebuyers and will go a long way in helping them achieve their dream of homeownership.
Why Property Prices are Rising
A post-pandemic recovery of the housing market in the past two years, along with significant tax advantages for property ownership and low-interest rates, have been the primary drivers of the rising prices. Other contributing factors have been a lack of housing infrastructure on the supply side coupled with regulatory constraints.
So if you are looking to buy your first home, now would be a great time to start planning and saving. The government has made it easier for you, and with a bit of help from the private sector, you will be on your way to homeownership.
Whatever path you choose, it comes down to your mortgage payments. With Joust, you can minimise your mortgage payments with the lowest interest rates based on your profile and specific needs.
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