If you’ve been following the election these past few weeks, you would have heard various politicians talking a lot about things like ‘cost of living’ and ‘housing affordability’.
They’re the political buzzwords of 2022.
It’s little wonder. Rising interest rates and record-high property prices have made home ownership an issue of immense concern and frustration for many Australians.
And the politicians know it.
So, with just days until the polls open, policy announcements from both parties are coming in thick and fast.
Here’s what the two major parties are promising for home buyers and housing affordability in this federal election:
Help to Buy Scheme
A new Help to Buy scheme would see an elected Labor Government contribute up to 40% of the purchase price for new homes and up to 30% of the purchase price for existing homes.
That portion of the property would then be owned by the government and could be bought back by the home owner over time.
According to Labor’s campaign spokesperson, Jason Clare, the scheme would allow people to buy a home with a “smaller deposit, a smaller mortgage, and smaller mortgage repayments”.
This would mean that for a home buyer 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 home buyer 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*
Who is it for?
Help to Buy would be available to Australians with a taxable income of up to $90,000 for individuals and up to $120,000 for couples.
Applicants would need to be Australian citizens who are not current home owners, either in Australia or overseas. The scheme would not be restricted to first home buyers.
Eligible home buyers would need a minimum deposit of 2% to participate. They would also need to live in the home as their principal place of residence.
How many would benefit?
There would be 10,000 places made available each year.
What else is Labor offering?
Help to Buy is part of a suite of Labor policies designed to improve housing affordability and ownership, including the:
- Regional First Home Buyer Support Scheme
- Housing Australia Future Fund
- Restoring Funding for Homelands and Improving Remote Housing
- National Housing Supply and Affordability Council
Super Home Buyer Scheme
Just this week, the Liberals have announced a new Super Home Buyer scheme that would allow people to access up to 40% of their superannuation savings (up to a maximum of $50,000) to use as a deposit on the purchase of their first home.
Couples would both be able to access the scheme, drawing a combined maximum of up to $100,000 from their super.
If the house was later sold, the money taken out to invest in the home would be returned into the superannuation account, including a share of any capital gain.
Morrison claims the scheme would slash the average time it takes to save for a home by three years.
Who is it for?
There would be no income or property caps under the Super Home Buyer scheme, with eligibility restricted to first home buyers who have saved 5% of the deposit.
How many would benefit?
There would be no annual cap on the number of people able to take up this offer.
What else is the Liberal party offering?
In addition to this new Super-based initiative, the Liberal party has also promised to support home buyers by:
- expanding the First Home Guarantee to 35,000 places each year, up from 10,000 per year – helping people build or buy a new home with a 5% deposit.
- expanding the Family Home Guarantee with 5,000 places each year – helping single parents purchase a home with a 2% deposit.
- establishing the Regional Home Guarantee with 10,000 places to support home buyers in regional Australia.
Are any of these policies actually any good? And will they make a difference?
The answer is both yes and no.
Home ownership is an asset that builds your own personal wealth and provides a level of security that renting cannot. With increasing rental prices and shortages, in some areas, of rental properties, home ownership is more important than it was in the past.
Both of these policies will make home ownership possible for a lot of people that normally would not have this opportunity.
However, both also have downsides.
With both policies, when buyers go to purchase their next home, a good chunk of the equity they have built up over the years will not be available to them to upsize their home – as they will either have to repay the government or their superannuation fund.
My other concern, particularly with the Liberal policy, is that while ever that $50,000 is not in superannuation, people will miss the opportunity of compounding interest. Home buyers would need to see the value of their home grow by more than the value of their assets inside super to be better off.
In terms of the bigger picture, neither policy will help to solve the broader causes of the problem – rising prices and housing supply.
* 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.