Now that Labor has won the federal election, it’s time to focus on the housing incentives they announced during the campaign.
Headlining Labor’s plans are two schemes aimed at helping more Australians break into the property market:
Let’s look at them in more detail and consider how they might affect property investors.
The Regional First Home Buyer Support Scheme
Labor’s Regional First Home Buyer Support Scheme will help 10,000 regional first home buyers each year to buy a home by providing guarantees of up to 15% of a property’s value.
As a result, first home buyers can secure a home with a deposit of just 5%, without paying lender’s mortgage insurance (LMI), which is generally applicable when you have a deposit of less than 20%.
This can amount to some serious savings. For example, Labor estimates that a buyer who purchases a $800,000 property on the Central Coast can save up to $32,000 in LMI costs.
The scheme is expected to start in January 2023. To be eligible, buyers must:
- Live outside a capital city
- Be a first home buyer
- Live in the house purchased
- Earn up to $125,000 for individuals or $200,000 for couples
- Have been living in the region for at least 12 months.
- Meet property price thresholds
While you have to initially live in the property, it can eventually be converted into an investment property.
Bear in mind, turning your home into an investment property does come with some tax implications, especially if it’s positively geared. So it’s sensible to seek expert advice before making any move.
Help to Buy
This new $329 million scheme lets eligible home buyers purchase a property with a deposit as low as 2% while also avoiding high mortgage repayments and LMI.
It does that through a shared equity model, in which the federal government gives eligible Australians an equity contribution of up to 40% of the purchase price of a new home and up to 30% of the purchase price for an existing home.
This results in a smaller deposit, a smaller mortgage and smaller mortgage repayments.
People will be able to buy out the government’s stake in the house over time. Before that point, they won’t have to pay rent for the portion of the home owned by the government.
There are only 10,000 spots available for the scheme every year. That said, you don’t need to be a first home buyer to qualify.
Rather, all Australian citizens are eligible – even if you’re a property investor – as long as they:
- Meet the income cap of up to $90,000 for individuals and $120,000 for couples
- Don’t currently own or have an interest in a residential property
Naturally, price caps apply to the maximum value of the home, depending on the region.
There’s one more catch: as the federal government owns part of your home, it will recover its equity – and any share of the capital gain – when the property is sold.