Home affordability has hit centre stage in the federal election with Labor offering a scheme in which buyers can purchase a home more cheaply if they share equity in the property with the Government.
Labor says it would take up to 40% equity in a home to give Australians a better opportunity to get on the property ladder. Buyers could purchase the Government’s equity at a later stage. When they sold, the Government would share any profit in line with its equity position.
The program comes on top of its promise to retain the Coalition’s First Home Guarantee scheme, in which the Government guarantees 15% of a first-home buyer’s deposit to avoid costly Lenders Mortgage Insurance.
They are attractive incentives and come amid speculation of future interest rate rises and a softening of property values after the 20-plus percentage growth rates in values that were achieved last year.
We recommend you carefully study the incentives being offered by the major parties along with the stamp duty discounts and grants already available through state governments.
Both major parties are limiting the availability of their property pledges. Labor’s equity-share initiative invites 10,000 applicants each year. The Coalition’s First Home Guarantee scheme is available to 35,000 applicants.
So, it’s important to consider your options relatively quickly before the various programs are fully-subscribed. Key points of the programs:
Labor’s equity-share program
Open to 10,000 first-home buyers and existing owners looking to move.
Individuals and couples must earn less than $90,000 and $120,000 respectively.
The Government will take a 40% stake in newly-built homes and a 30% share in existing dwellings.
The program will be aligned with the First Home Guarantee scheme. If using this program, first-time buyers need only put down a 2% deposit instead of the standard 20% and the Government will make up the difference.
Coalition’s First Home Guarantee
Provide 15% of a standard 20% deposit to enable first-time buyers to avoid Lenders’ Mortgage Insurance. Single parents will need only a 2% deposit.
Increase the supply of new homes outside the cities by incentivising purchases with 10,000 region-specific, low-deposit guarantees for buyers who have a 5% deposit and wish to buy a newly-built home.
Spend an additional $2 billion to the $3.5 billion pledged in low-cost financing for social and affordable homes, supporting 27,500 dwellings.
Labor pledges to continue this scheme for the first six months and then implement its version.
At our agency, we have a number of properties available that would make perfect first homes. Please don’t hesitate to contact us if you’d like to see what’s available.