What does the new Labor Govt offer home buyers?

Would you buy a home with a friend? How about your new PM Anthony Albanese? We look at the new Labor government's ‘Help to Buy’ policy for home buyers which the ALP says will help 10,000 Australians per year buy a home.

Residz Team 3 min read

Australians have long held sacred the dream of home ownership. But record house prices, rising interest rates, and soaring cost of living pressures make home ownership a privilege instead of a ‘human right’ (as this recent protest in Sydney called it).  So what does recently sworn-in Prime Minister Anthony Albanese say his new Labor government will do about the plight of homebuyers?

What homebuyers won’t get

For a start, he won’t tap into superannuation as the outgoing Morrison government promised to do in the weeks leading up to the May 21 election. To help first home buyers enter a real estate market where property prices increased at nearly seven times the pace of wages growth over the past year, the Coalition’s election promise would have allowed raiding of superannuation to top up home deposits. That didn’t secure them a win at the ballot box.

Help to buy

The Labor government instead offers ‘Help to Buy’ as one of its key policies. It specifically targets 10,000 Australians per year who have incomes under $90,000 ($120,000 for couples). As its policy page states, 40 years ago, almost 60% of young Australians on low and modest incomes owned their own home. Now, it is only 28%.

Help to Buy will “cut the cost of buying a home by 40%”, the policy release says. Eligible home buyers must save a 2% deposit, then the Federal Government will chip in up to 40% of the purchase price if it’s a newly-built home, and up to 30% for an existing home. You won’t pay any rent for the government portion, but when the house is sold you’ll pay them back (unless you bought them out earlier).

Mortgage repayments up to $1600 less per month

The policy estimates that for a homebuyer in Sydney, buying at the maximum price cap of $950,000 with 40 per cent equity, monthly mortgage repayments would be over $1,600 cheaper*.

For a homebuyer in regional Queensland, buying at the maximum price cap of $500,000 with 40 per cent equity, monthly mortgage repayments would be over $850 cheaper*.

Labor’s Help to Buy scheme. NOTE - Regional centres include Newcastle & Lake Macquarie, Illawarra, Central Coast, North Coast of NSW, Geelong, Gold Coast and Sunshine Coast.

Eligibility

To be eligible, you:

  • Are an Australian citizen aged 18 or over.
  • Earn $90,000 or less per annum for individuals, or $120,000 or less per annum for couples.
  • Will live in the home.
  • Not own other land or property – even overseas.
  • Have saved a minimum 2% deposit of the home price and qualify (and can finance) the remainder of the purchase through a standard home loan with a participating lender.
  • Pay for any associated purchase costs like stamp duty, legal and bank fees. Homebuyers will also be responsible for ongoing property costs like rates, strata and any other bills.

No need for Lenders Mortgage Insurance

The policy says homebuyers won’t need Lenders Mortgage Insurance, which could save them  $30,000 or more. And, during the loan period the homebuyer can buy a 5% (or more) additional stake in the home when they are able to do so.

Other housing initiatives

Help to Buy is in addition to Labor’s:

  • Regional First Home Buyer Support Scheme which will provide a government guarantee of up to 15% for eligible first home buyers, so locals with a 5% deposit can avoid paying mortgage insurance – saving up to $32,000.
  • $10 billion Housing Australia Future Fund which will build 30,000 new social and affordable housing properties in its first five years.
  • $100 million for housing and essential services on Northern Territory homelands plus maintenance and upgrades to remote housing across Western Australia, South Australia, Queensland and the Northern Territory.
  • Establishing of a National Housing Supply and Affordability Council.

For the full Help to Buy policy, click here.

* Source: NAB home loan repayment calculator. This scenario assumes a 25-basis-point increase on the current base variable mortgage rate of 3.45%, monthly principal and interest over 30 years.

Image: New Prime Minister Anthony Albanese with the Governor General His Excellency General the Honourable David Hurley AC DSC (Retd).