With the Labor party winning this week’s federal election, we take a closer look at their plans for housing and how it could impact the market and you. Before the election, the party announced if it was successful, it planned to implement these changes and policies:
First Home Guarantee (FHBG)
The income limits under the FHBG will be abolished, meaning any eligible first home buyer can purchase a home with just a 5% deposit, regardless of their income. There will also be no caps on how many people can apply.
Help to Buy
The Help to Buy shared equity scheme – which is earmarked to begin later this year – will allow eligible first-home buyers to enter the market with just a 2% deposit without needing to pay lenders mortgage insurance (LMI). The government will take an equity stake of up to 30% for an existing home and up to 40% of the purchase price of a new build. The property price caps were recently increased.
100,000 homes for first-home buyers
Labor said it would commit $10 billion to build 100,000 homes exclusively for purchase by first-home buyers. The plan for the construction spans eight years.
Apprentice incentive payments
Apprentices will receive up to $10,000 in priority areas, such as construction, as an incentive to complete their training. The party says it will fast-track the qualification of 6,000 tradies to help build more homes across Australia.
Foreign investors banned
International buyers are banned from purchasing property in Australia for two years. The government is also looking into foreign land banking, where an investor purchases and holds land for future sale or development.
Housing Australia Future Fund
55,000 social and affordable rental homes will be delivered to help reduce the social housing waiting list.
What impacts could this have?
For a start, a number of these measures will assist first-home buyers get into the market sooner. Needing a 5% deposit instead of 20% to avoid LMI could mean someone may only need to save $40,000 instead of $160,000 to purchase property worth $800,000.
However, according to Ray White Chief Economist Nerida Conisbee, without commensurate supply increases, this could lead to price growth.
“With more buyers able to enter the market simultaneously and competing for the existing housing stock, upward price pressure becomes inevitable,” she said.
Ms Conisbee also said a number of factors could limit Labor’s ability to deliver on its target to build 1.2 million new homes over five years. These include growing building costs, low labour productivity and the extension of average construction timeframes.
“The paradox of Labor’s housing policy is that while it risks exacerbating affordability challenges in the short term through price inflation, it may ultimately create the conditions for improved affordability in the longer term,” she said.
Thinking about buying property?
Increased support for first-home buyers could help you get in the market sooner. Decreased competition from international investors could also help if you are looking to purchase an investment property. Reach out to find out if any of Labor’s policies could impact you. We can help you devise a plan that is right for you.
