The government has finally announced new details of its first-homebuyer deposit scheme, offering fresh relief for parents supporting children in buying their first home – with as many as 10,000 Aussies set to benefit each year.
The scheme, which was originally announced before the federal election in May, would offer a guarantee allowing eligible first home buyers on low and middle incomes the chance to buy a home with a deposit of as little as 5 per cent. The government would essentially guarantee the difference of a standard down payment for as many as 10,000 first home buyers a year.
However, the Morrison Government has now confirmed there will be price caps for support. Loan guarantees in Sydney will only be offered for properties worth up to $700,000, and $600,000 for Melbourne. Meanwhile, caps will drops as low as $375,000 in the Northern Territory.
Set to start from January next year, the scheme would also require applicants to have taxable incomes up to $125,000 per year for a single person and up to $200,000 for couples. A week-long consultation has now been opened on the plan.
“The price caps are calibrated to take into account median house prices and conditions in respective markets and indeed they are set with reference to the threshold for concessional arrangements for stamp duty in various states,” Finance Minister Mathias Cormann told Sky News. “There is no specific number of guarantees per jurisdiction it will be on a first-in, best-dressed basis. Ultimately the scheme will be driven by demand, up to 10,000 guarantees a year.”
Commenting on the scheme, The Australian‘s finance expert Robert Gottliebsen said it will have a direct benefit for many parents, who will no longer have to provide a parental bank guarantee to enable their children to buy their first home. More and more parents have had to step in to help their adult children get onto the property ladder in recent years, as prices continue to soar.
“Parental guarantees of housing loans can add great stress to families and interfere with retirement plans,” he wrote in an opinion piece for the news outlet. “Those who can make the scheme work for them should start looking for dwellings now and cancel their January holidays. I have a special interest in the plan because I recently witnessed [a] couple of these parental guarantees and I understand the strains they place on couples in or approaching retirement.”
While he admitted there are drawbacks to the scheme, such as the price caps meaning many people in major cities like Sydney and Melbourne being forced to buy a smaller property in the outer suburbs to ensure they don’t go over the cap, it’s beneficial for parents to offer money for a lower deposit than get involved with their child’s guarantee.
Housing Minister Michael Sukkar has since confirmed there won’t be a set number of deposit guarantees per state, with the government instead watching demand closely to adapt the scheme as it goes forward.
“We’re not adding any layers of bureaucracy,” he told reporters in Melbourne. “These are guarantees that banks are able to offer to customers. The banks will undertake the same credit checks, the same lending criteria that they would otherwise.”
The Property Council of Australia has welcomed the new details of the loan scheme, saying it will not only help people buy their first home, but also increase confidence in the housing sector. Chief Executive Ken Morrison said in a statement: “The Government seems to be getting the balance right between helping genuine first home buyers while also recognising the variations in markets around the country, and between metropolitan and regional areas through the setting of price caps for eligible property purchases.”
He added: “The scheme comes at a time of declining construction levels for new housing which has an impact on jobs, housing affordability and supply. Getting these settings right, including keeping the focus on new housing construction, will be vital in ensuring the scheme is a winner for first home buyers and the housing sector more generally.”
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