Further assistance to low and middle-income home buyers is on the horizon with the introduction of legislation to parliament which, if passed, will result in the federal government taking an equity stake of up to 40 per cent in new or existing homes.
Promised by federal Labor ahead of the 2022 federal election, homebuyers under the Help to Buy scheme will see a portion of their home owned by the government. The government will recoup the funding, plus its share of capital gain on the home, when the property is later sold.
For the purchase of a new dwelling, the government will provide up to 40 per cent of the purchase price and up to 30 per cent for an existing dwelling.
Eligible participants will need to pay a minimum two per cent deposit and still qualify for a standard home loan to fund the outstanding amount.
The scheme’s participants, which will be capped at 10,000 applicants a year, will not be required to pay lenders’ mortgage insurance, a one-off premium paid when borrowing more than 80 per cent of the property’s value.
Participants will also be able to purchase an additional stake in the loan, reducing the government’s proportion.
Prior to the election, Labor’s shared equity scheme was forecast to cost $329m over its first four years. Previously, the government said the scheme would be made available to homebuyers with a taxable income of up to $90,000 for individuals and up to $120,000 for couples.
Homebuyers must be Australian citizens and not currently own or have an interest in a residential dwelling.
States will need to pass their own legislation in order for the Help to Buy program to operate in their jurisdiction, while the Commonwealth will pass enabling legislation for the scheme to run in the territories.
States and territories previously agreed to progress legislation for the scheme at National Cabinet.
In recent decades home ownership rates among young Australians have tumbled, falling from 64 per cent of 30-34 year olds in 1971 to just 50 per cent in 2021, posing a major challenge to policy makers.
Housing Minister Julie Collins said the government’s scheme had the potential to make purchasing a home more affordable for those locked out of the housing market.
“Right across the country Help to Buy will be life changing, bringing home ownership back into reach for thousands of Australians, particularly renters,” Ms Collins said.
“It won’t just be a leg up into home ownership with savings from a smaller deposit – it will provide long-term relief to Australians who are part of the scheme.”
On Monday, Liberal Senator Andrew Bragg proposed the government allow household borrowers to use their superannuation to offset their mortgages to assist with the painful squeeze of high interest rates.
“Allowing Australians to use their super to offset their mortgages will have an immediate impact on easing mortgage stress,” Mr Bragg said.
“In the absence of Labor adopting a contractionary fiscal policy, all options should be on the table.”