Labor’s promised home affordability policies will be in the spotlight during the first 100 days of the new Albanese Government as thousands of first-time buyers hope to break into the property market.
A centrepiece of Labor’s victorious election campaign was its Help to Buy scheme – a $329 million initiative to take equity stakes of up to 40% in newly-built properties, or 30% in existing homes, purchased by first-home buyers.
At Labor’s official campaign launch, Mr Albanese said the program could cut a mortgage by up to $380,000 in the most expensive cities.
Similar plans exist in the United Kingdom, Victoria and Western Australia.
Under Labor’s policy, the government will recoup its investments when first-time buyers decide it’s time to sell. Not only must the original stake be repaid, but owners have to return any capital gain that reflects the percentage of Commonwealth ownership.
First-time buyers must have a minimum 2% deposit and qualify for a standard home loan. Annual income is capped at $90,000 for individuals and $120,000 for couples, ensuring the program is available to only low and middle-income earners.
Labor also pledged to continue the existing First Home Loan Deposit Scheme, which the former Morrison government brought in.
Under the scheme, up to 35,000 first-time buyers need to commit only 5% of a standard 20% deposit, and the Commonwealth will guarantee the gap. Single parents have to find only a 2% deposit.
Usually, if you don’t have a 20% deposit, you must take out Lenders Mortgage Insurance (LMI), which costs approximately $30,000 and protects the lender from default.
Labor’s Help to Buy plan has not been universally welcomed. The Chief Economist at Ray White, Nerida Conisbee, predicted prices may rise 6%.
“Giving first-home buyers more money than they otherwise would have, means that prices will rise,” she said. “A similar scheme in the UK to Labor’s “shared equity” proposal led to a 6% increase in prices. It is likely similar increases would be seen.”
Labor also pledged:
- A National Housing Supply and Affordability Council to ensure the Commonwealth plays a leadership role in increasing housing supply and improving housing affordability.
- To continue the operation of the Coalition’s First Home Loan Deposit Scheme, reviewing the terms on a six-monthly basis.
- Move to its own version of the scheme, which it promised would save buyers up to $32,000 in mortgage insurance and secure a home with a 5% deposit, with the Commonwealth guaranteeing the remaining 15%.
- Regional First Home Buyer Support Scheme – identical financial incentives. The program covers existing houses, townhouses and units, plus house-and-land packages, off-the-plan apartments and land with a contract to build. Applicants must live outside a capital city and be an Australian citizen aged 18 or over. They must live in the house purchased and have resided in a regional area for the previous 12 months. The regional program will start in January 2023 and cost $12.1 million to the end of 2024-25.
- 20,000 social housing properties – 4,000 of which will be allocated for women and children fleeing domestic and family violence and older women on low incomes who are at risk of homelessness.
- 10,000 affordable homes for the frontline workers such as police, nurses and cleaners who kept us safe during the pandemic.