Will Labor’s Help to Buy policy have a big impact?
You know, I’d been thinking that the election campaign hadn’t delivered all that much for property.
Normally housing policy is a hot-button topic, and you have money flying here, there and everywhere.
But things had been a bit quiet.
That was until Sunday that is, when Anthony Albanese launched Labor’s official election campaign.
(Who knew we’d been listening to the unofficial, bootleg campaign until now.)
And sure enough there was a little something for housing.
Labor’s calling it the “Help to Buy” scheme.
Basically, it’s a shared equity scheme.
So if you qualify and can come up with a 5% deposit, the government will take a 30% stake in the house (40% for a new home).
So you tip in 5%, the government tips in 30%, and then you go to the bank for the remaining 65%.
There government then has an interest in your home. When you sell it, if you sell it for a profit, then the government takes 30% of your profit. And if you sell it for a loss, the government wears 30% of the loss.
So Canberra just became a property investor.
But think about this for a sec. The price cap in Sydney is for properties valued at $900,000 or less.
So at 30% we’re talking a few clicks shy of $300K!
Imagine having an extra $300K in your pocket at auction. Imagine competing with the guy who does.
For now, there’s only 10,000 places available in this scheme in the first year. That’s something, but given over 100,000 people buy their first home in any year, it’s not going to be massive.
But this is how these things usually play out. Same story with the LNP’s Home Guarantee Scheme. You start small. Make sure it’s working, and then roll it out to more people.
And at least initially, it’s targeted at lower-income earners.
There are price caps on the kinds of properties that are eligible, and it’s limited to individuals with a taxable income of up to $90,000, and couples with a taxable income of up to $120,000.
The other thing I like about it is if you do major renovations on the place, then you’re entitled to the full uplift from the renos. The government’s stake is pegged to 30% of the unimproved value of the property, not the final sale price.
This is great because I’ve seen many people put in some sweat equity into renovations on their home, and then use that equity to begin their investing career.
So it’s great that that ladder will still be available to people under this scheme.
It is true that schemes like this already exist in WA, SA and Tasmania. But there’s no national scheme, and the Federal Government has access to the cheapest money in the country, so it makes sense for them to use their borrowing power to help people out.
So there it is. It does contribute to housing demand, particularly in certain entry level markets, so it is price positive, but not in a massive way… for now.
That said, if the scheme is rolled-out successfully, then it could easily be expanded.
And so that’s Labor’s contribution. A policy that seems to make everyone happy – from the development lobby to the social housing welfare groups.
There you go Labor. That’s how you do it.
Democracy is about giving people what they want.