Labor’s Policies Helping First Home Buyers

In May, Labor was voted in at the Federal Election. If you’re an aspiring homeowner, the change of Government could mean new opportunities to help get you into your own home sooner rather than later.

In this article, we cover some of Labor’s key policies that may help those looking to get into the property market.

Help to Buy scheme

Labor pledged to help more people get into the housing market sooner by introducing the Help to Buy scheme. Under the scheme, eligible home buyers can purchase homes with just 2 per cent deposit. The government will throw in up to 40 per cent of the purchase price of a new home and up to 30 per cent of the purchase price of an existing home.

The shared equity scheme allows eligible homebuyers to: 

  • Get into the market with a smaller deposit and have a lower mortgage and interest repayments (as you’re taking on a smaller bank loan).
  • Avoid having to pay Lenders’ Mortgage Insurance (which is usually applicable if you have a smaller deposit).
  • Buy an additional stake in the property (a minimum 5 per cent stake) during the loan period if/when finances permit.

Help to Buy will be available to 10,000 Australians each financial year.

To be eligible, you must: 

  • Be an Australian citizen of at least 18 years of age.
  • Earn $90,000 a year or less for individuals, or $120,000 or less a year for couples (note: if your income goes up during the loan period and exceeds the Help to Buy threshold for two consecutive years, you must repay the Government’s financial contribution in part or whole based on your circumstances).
  • Live in the property as your principal place of residence.
  • Not own any other land or property – either in Australia or overseas.
  • Have saved the required minimum 2 per cent deposit and get approved for a home loan with a participating lender.
  • Pay for any associated purchase costs like stamp duty, legal and bank fees, as well as ongoing property costs like rates, strata and any other bills.
  • Be buying a property that falls under the price cap for your region (more info here).

Labor plans to double foreign investment screening fees and financial penalties from July 2022 and raise about $445 million over the forward estimates to pay for the scheme. It will take a share of the profits when the property is sold.

Regional First Home Buyers Support Scheme

This scheme will be available for 10,000 first home buyers a year in regional areas. Eligible first home buyers can enter the market with a deposit of just 5 per cent, while the Government will guarantee up to 15 per cent of the purchase price. The home doesn’t need to be new – existing houses, townhouses and units are included. House and land packages, off-the-plan apartments, and land with a contract to build are all covered.

To be eligible, you must: 

  • Live outside a capital city.
  • Be a first home buyer, an Australian citizen and over 18.
  • Live in the property purchased.
  • Have a taxable income of up to $125,000 per year for singles and $200,000 a year for couples.
  • Have been living in the region for at least 12 months.
  • Meet the property price cap for the region under the existing First Home Loan Deposit Scheme.

Labor also vowed to improve the current scheme by updating property price caps every six months and improving the process of reallocating unused guarantees.

Other Labor Housing Proposals

National Housing Supply and Affordability Council

The new government plans to set up a council to address the housing supply problem in Australia. Experts from various fields will provide input and the council will report on issues such as land use, housing supply and demand, and rental affordability.

Housing Australia Future Fund

Labor plans to create a $10 billion fund to build 30,000 new social and affordable housing properties in 5 years. This will support 21,500 full-time jobs annually.

Looking to get into the market?

If you’re looking to get a foot up on the property ladder, talk to us about how to get started.

Housing investor loan cap ‘reaching end of useful life’: APRA

The banking regulator has signalled it could ditch its 10 per cent cap on lending to property investors as the measure is “probably reaching the end of its useful life”.

Smaller lenders have criticised the 10 per cent cap for holding back competition.

The marketplace would welcome APRA addressing the cap’s current settings in order to improve competition, which will ultimately benefit the consumer.

Under pressure from regulators, banks have also in recent years overhauled their systems for assessing customers’ incomes, their debts, their cost of living, and their sensitivity to higher interest rates.

Now is the perfect time to seek professional advice if you are considering property investment.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

Competition heats up among lenders for first home buyers and investors

Softer conditions in home lending are prompting the country’s banks, whose loan portfolios are dominated by residential mortgages, to target growth opportunities in specific customer segments, including property investors and first home buyers.

Under the Australian Prudential Regulation Authority’s rules to dampen the housing market, no more than 30 per cent of new bank home loans can be interest-only, and banks’ housing investor loan books can grow no faster than 10 per cent.

The big four banks are now all well below these caps after various moves to increase interest rates and tighten credit.

Now is a great time to invest in property and source a great financing package in a highly competitive marketplace.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group