To address the continuing challenges faced by first home buyer Australians breaking into the property market, the Federal Government has announced in its Federal Budget 2022-2023 several measures to ease entry barriers.
The scheme aims to support single parents with dependent children in purchasing a family home. Eligible buyers will be able to secure property with as little as a 2% deposit without the need to pay Lenders’ Mortgage Insurance (LMI) as the government acts as a guarantor on the loan.
Purchasers may also access other schemes in addition to the FHG (i.e., Home Builder Grant or First Home Owner Grant) and stamp duty concessions. This super saver scheme brings the entry barrier lower than ever before for eligible purchasers.
The government will expand this scheme to be available to 10,000 more applicants, where first home buyers will only need a 5% deposit to secure a home.
Likewise, the government will allow this scheme to run for a second year and provide an additional 10,000 places. This enables first home purchasers to build a new home or purchase a newly built home with a deposit of only 5%.
First Home Super Saver Scheme
This scheme enables buyers to use voluntary contributions from their superannuation to put towards their deposit.
The government plans to expand this scheme to increase contributions from $30,000 to $50,000 to be counted towards the maximum releasable amount. The aim is to drive buyers to save with the concessional tax treatment.
Regional Home Guarantee
The government is seeking to provide 10,000 places for eligible applicants to buy and or build new homes in regional Australia. Under this scheme, applicants need only provide a 5% deposit. The 95% balance may be borrowed without lender mortgage insurance premiums.
Note however that the following schemes or changes to current schemes will not come into effect until legislation passes in parliament.
What does this mean for first home buyers?
In the first instance, the Federal Budget provides more of an accessible pathway for single parents and first home buyers. However, many have expressed concern that over incentivising purchasing through increased grants and tax benefits and reducing deposit thresholds may adversely affect the housing market as there are simply not enough houses to meet increasing demand!
The National Housing Finance and Investment Corporation’s research indicates that Australia will face, on average, 20,400 dwellings short, every year between 2025 to 2032.
Ultimately, policymakers are implored to rectify the root of the issue – chronic housing supply, to stop deteriorating affordability conditions.