Property Market Under The Labor Government

With a recent Australian Federal Election taking place, a lot was said by both sides in the lead up as this election would ultimately decide what the future for Australia, especially entering a post COVID world and economy, would look like. The main issues addressed by the major parties were of course, cost of living, Climate Change, the unemployment rate, inflation and the economy, healthcare and lastly, housing.

With Labor securing a majority government win for the first time in recent elections, let us have a look at what this means to the housing market in Australia, and how a Labor government aims to improve property development and investment markets.

Labor’s Policies For Housing Affordability

With an Anthony Albanese led Labor government in the driver’s seat for the first time in nine years, you might be wondering what policies will be introduced to deal with the current housing affordability concerns for Australians – especially for real estate in Sydney.

The Labor government has promised various policies that focus on helping everyday Australians get into the ever so exalted housing market. Almost all the policies are intended to assist people by boosting their buying power. This is important especially considering the recent increase in interest rates by the RBA (Reserve Bank of Australia).

The flagship housing-affordability policy curated by the Labor government is the ‘Help to Buy’ scheme, which is a shared equity scheme in which the government will co-purchase a home with an eligible buyer to help reduce the amount needed for a deposit

What Is The ‘Help to Buy’ Scheme & How Does It Work?

The Labor government is making it easier than ever for 10,000 applicants per year to buy their first home. Under the scheme, buyers will only require at least 2% of the purchase price saved in order to borrow up to 40% of the purchase price of a new home and up to 30% for an existing home. 

First home buyers will be saving thousands of dollars by not having to save and pay for Lender’s Mortgage Insurance (LMI). Borrowing against your pre-approved purchase price means no more worrying about whether or not there’s enough money set aside. This makes property development an even more attractive option for new home buyers as they receive an extra 10% borrowing assistance.

What Is The Eligibility Criteria For The Help To Buy Scheme?

In order to apply for the ‘Help To Buy’ Scheme, you must meet the follow criteria:

• Be an Australian citizen over the age of 18
• Applicants will need to earn under $90,000 per year for individuals, or less than $120,000 for couples, (if your income exceeds this amount for two consecutive years, you may be required to repay early)
• Be buying a house to live in and not an investment property
• Don’t currently own property, either in Australia or overseas
• Have saved at least 2% of the property price
• Be able to pay for other associated costs that come with buying a home including stamp duty, bank fees and legal fees

Help To Buy Scheme Property Price Caps – Both Existing and New Property Developments

Frequently Asked Questions About The ‘Help To Buy’ Scheme

What are the benefits of the scheme?

There are various benefits which are dependent on your personal and financial situation. Some benefits include:

• No need to save for a higher deposit while house prices may rise 
• No fees or interest charged by the government on the loan so you don’t need to worry about rising interest rates
• The fees and charges over the life of your loan are much lower due to having a higher LVR, which gives you better bargaining opportunities

Can I increase my stake in the property?

Yes, borrowers are able to increase their stake in the property at a minimum of 5% at a time, if their financial situation allows. 

What happens if I exceed the income limit? Will I have to sell if I get a pay rise?  

If your income increases during the life of the loan you will be expected to start increasing your stake of ownership in the property, as your circumstances allow with increasing repayments.

Regional Housing Scheme, Housing Australia Future Fund

This is another proposed scheme to assist in housing affordability in Australia. The Regional First Home Guarantee is set to help 10,000 regional families each year to buy their first homes. It will also put $10 billion towards new social and affordable housing properties across Australia, once again, meaning there will be plenty of opportunity for property developments in Sydney and across the country.

The Labor government promises to build 30,000 new social and affordable housing properties in its first five years. Here is how it will work:

• 20,000 social housing properties, with 20% of those prioritised for women and children fleeing family violence and for older women on low incomes who are at risk of homelessness
• 10,000 affordable housing properties for front line workers including police, nurses and cleaners to make it easier to live closer to work

Investment returns from the Future Fund will also be allocated to:

• Remote Indigenous communities to repair and improve housing
• Crisis and transitional housing for women and children fleeing family violence, and for older women at risk of homelessness
• Veterans who are experiencing homelessness or at a risk of homeless by offering housing and specialist services 

Lastly, the Labor government will also be establishing a ‘National Housing Supply and Affordability Council that will set targets for land supply and provide advice on improving land use and supply.

This is another great opportunity for the growth of property development in Australia.

The Future Of House Prices

According to industry experts, it is still too soon to estimate what the future of house prices will look like in Australia. These policies may also take longer to come into full effect than originally anticipated.

However, what we do know is that many experts believe that the Labor Government’s schemes will have a less inflationary effect on house prices compared to that of the Liberal Party’s ‘Super Home Buyer Scheme’.

Other initiatives of the Labor government such as reduced taxes, increased subsidies and a boost to minimum wage will contribute to more cash. This ultimately means it will be easier for Australians to afford their mortgage repayments and get into the growing property market.

This may or may not result in house price increases across the country, especially for popular cities such as Sydney, Melbourne, Brisbane and Canberra. Any policy that affects the demand, adds to demand which results in increases to price. However, with only a few spots in the scheme and a strict eligibility criteria, it is unlikely to have a drastic effect.

Conclusion

With a new Labor government taking the reins and implementing a new scheme for easier first home ownership, it might be worthwhile considering new property developments, especially with real estate in Sydney.

Regardless of whether you are a first home buyer, looking to build a home with a property developer or simply looking for your next investment, contact HYG today for all your real estate and property development needs.