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Labor Government’s plans to support housing affordability

By ,| 5 min read

The Australian Labor Party has won the 2022 federal election, taking government for the first time in almost 9 years. Anthony Albanese has been sworn in to lead the country as Australia’s 31st prime minister.

Home buyers might be interested to know what the Labor Government plans to do to improve Australia’s housing affordability crisis.

We take a look at what the ALP’s plans are over the next 4 years and how you might benefit from the new initiatives and programs.

A background on Australia’s housing affordability crisis

Housing affordability has gone down the gutter in recent years as the cash rate and the cost of borrowing money dipped to all-time lows in November 2020.

This has made entering the property market increasingly difficult, particularly for first home buyers who don’t have help from the ‘Bank of Mum and Dad’.

Due to Australia’s current property crisis, buying a home today has been harder than ever before.

Homeownership rates have been quickly decreasing due to skyrocketing housing prices. From 1981 to 2016, homeownership rates for 25-34 year olds dropped from 60% to 45%. Among the least wealthy 40% of the same age group, it fell from 57% to 28%.

It’s only now, as the cash rate slowly climbs to normal levels, that Australians may start to see an ease in the growth of property prices.

As the cost of borrowing money rises, it’s likely we’ll see the end of increasing levels of mortgage debt.

The Labor Government has announced several policies to attempt to speed this process along and help Aussies across the country buy a home.

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The government’s Help to Buy program

The Labor Government has its sights set on housing affordability and has created a new Help to Buy program.

This program will help home buyers who don’t currently own land or a property purchase a home by slashing home buying costs by up to 40% and allowing lower deposits.

This means that prospective buyers can take out smaller loan amounts, which means smaller deposits and home loan repayments.

Home buyers must have a minimum deposit of 2% to be eligible.

This program allows the government to alleviate some of the financial burden by becoming an equity partner in the property and providing an equity contribution of:

  • Up to 40% for the purchase price of a new home
  • Up to 30% for the purchase price of an existing home.

This also means that home buyers will be able to avoid Lenders Mortgage Insurance (LMI) fees.

How the Help to Buy program works

As an example, let’s say you’re interested in buying your first home in Sydney’s Inner West and find a new home that will cost you $950,000. You save up a 10% deposit and are granted 40% equity by the government through the Help to Buy program.

You’d then only need to take out a home loan of $475,000 (50% of the cost of the property) rather than $855,000 (90% of the cost of the property) plus LMI for having a deposit lower than 20%.

This means you would save thousands of dollars in LMI fees and significantly reduce your monthly mortgage repayments at the same time.

Throughout the loan period, the home buyer can buy an additional stake in the home at a minimum of 5% when they are financially able to do so.

When the Help to Buy program launches, it will be open to 10,000 eligible participants each year.

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Help to Buy eligibility criteria

To be eligible for this program, you must:

  • Be an Australian citizen
  • Be 18 years of age or older
  • Earn an annual taxable income of up to $90,000 if you’re applying as an individual, or up to $120,000 if you’re applying as a couple
  • Use the property as your principal place of residence
  • Not currently own any other land or property in Australia or internationally
  • Have a minimum 2% deposit saved and qualify for the remainder of the purchase through a standard home loan with a participating lender
  • Pay for the other costs associated with buying a home i.e. stamp duty, conveyancing fees, legal fees and any ongoing bills involved like rates and strata.

If the buyer’s annual income exceeds the thresholds set out above for 2 years in a row, they will need to repay the government’s contribution.

How much could you save under the Help to Buy program?

The table below shows how much you could potentially save under the Help to Buy program:

RegionProperty price capMaximum saving – new homeMaximum saving – existing home
NSW – capital city & regional centres$950,000$380,000$285,000
NSW – rest of state$600,000$240,000$180,000
VIC – capital city & regional centres$850,000$340,000$255,000
VIC – rest of state$550,000$220,000$165,000
QLD – capital city & regional centres$650,000$260,000$195,000
QLD – rest of state$500,000$200,000$150,000
WA – capital city$550,000$220,000$165,000
WA – rest of state$400,000$160,000$120,000
SA – capital city$550,000$220,000$165,000
SA – rest of state$400,000$160,000$120,000
TAS – capital city$550,000$220,000$165,000
TAS – rest of state$400,000$160,000$120,000
ACT$600,000$240,000$180,000
NT$550,000$220,000$165,000

Note: Regional centres include Newcastle & Lake Macquarie, Illawarra, Central Coast, North Coast of NSW, Geelong, Gold Coast and Sunshine Coast.

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What else is the Labor Government doing to improve housing affordability?

The Help to Buy program isn’t the only program the government has in the works. A range of other initiatives could be beneficial for Aussies struggling to find or buy a home. These include:

1. The Regional Home Guarantee

Labor is backing the expansion of the Coalition's Home Guarantee Schemes. This includes the introduction of the new Regional Home Guarantee in the 2022/2023 financial year.

The Regional Home Guarantee was announced in the 2022 Federal Budget in March.

It was created to help regional buyers purchase a home with a deposit of as little as 5%, without paying LMI. This is because the government guarantees up to the remaining 15%.

Both first home buyers and people who haven’t owned a property in the past 5 years may be eligible.

2. The Housing Australia Future Fund

The $10 billion Housing Australia Future Fund will be created to provide social and affordable housing.

In the first 5 years, this program aims to:

  • Build 20,000 social housing properties – 4,000 allocated to victims of domestic violence and older women at risk of homelessness
  • 10,000 affordable homes for frontline workers including police, nurses and cleaners.

3. The National Housing Supply and Affordability Council

The government is planning to create a National Housing Supply and Affordability Council to ensure the Commonwealth plays a pivotal role in improving housing affordability.

The council will look at land supply and land use to potentially improve housing supply and advise on how to boost the construction of social and affordable housing.

4. Restoring Funding for Homelands and Improving Remote Housing

With over 62,000 First Nations people living in overcrowded housing in remote areas, the government has committed:

  • $100 million to urgent housing and essential infrastructure on Northern Territory homelands
  • $200 million from the Housing Australia Future Fund to improve remote housing in Western Australia, South Australia, Queensland and the Northern Territory.
  • To create a new remote housing agreement with the Northern Territory that includes homelands when the current agreement expires in 2023.

With a range of new initiatives being introduced to support home buyers, are you interested in starting your property journey? Our Home Loan Specialists can help answer any questions you have and point you in the right direction. Book an appointment with an expert today.

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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.

Tags: home loan, first home buyer, first home, first property, owner occupier, principal place of residence, deposit, home

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