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%.
Happy days.
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.
JG.
RUTH says
Thanks Jon.
May all the Gods save us! The devil is in the detail here, I suspect with the tax.
‘On your side’ didn’t know that. Sounds like some sort of skin disease or worse, barnacles? Anyone know how to scrape ’em off?
John says
As with every other scheme, the net effect will be that prices are pushed up even higher. It’s already happened in the UK.
Con Zoumis says
$10,000x average $300,000 govt input = $3,000,000,000 ($3Billion)
so the people put in $3Billion plus interest for the term of ownership of the first home buyer thus adding to demand and throwing a further $9Billion into the housing market that would otherwise not be there
is this what the overheated housing market needs so house prices get further out of control to satisfy 10% of first home buyers while the other 90% find house prices are getting further away given the uplift in demand?
its these kind of thought bubbles that lead to inflated pricing and subsequent recessions (and we all know what they cost)
Maybe we could release cheap land in country areas to be purchased ultimately by first home buyers only?
Kelsey says
Wouldnt that be sensible. Maybe even give them the land and get them to regional areas. Probably too sensible. Like buying farms so our aged farmers can retire and let younger people lease to purchase. Keeps Australia in Australian hands and maintain our food security. Not enough votes in it
Edwin Serra says
The sheep lining up for slaughter mentality we’ve had in Australia the last 30 years or so,, Remove the bludgers, lazy, druggies,. ,the ones who manage to live a life of almost luxury, even on dole money,. disability money ,..when they’re healthier than me. .,and those who have already worked out that if you’ve got nothing. the government can’t take anything from you. In fact government schemes, Federal, State and local, are all ears to help them further with free money and goods. So if we remove those useless to society .,to say the least, individuals, who do we have? We have the responsible, hard or smart workers, entrepreneurs, innovators , for whom we can
n be proud off, per capita.., who fulfil the Great Aussie dream, and manage to keep it alive by sheer planning. saving, working long hours, and being honest ,sober, nicotine and drug free. These people deserve to see, or even being the instigators or the vehicle for Real
Estate booms.. ,and good on them ..Why not. Are we supposed to worry about the druggies and the ones that have already given up but still manage to have a better life than most by living on the Edge and depending on next fortnight’s income to pay last moth’s bills? . And then who else is there? Aaah..The smart Labor party, identified a niche vote catcher,, but it’s not just that, ..it shows how the present Feds have only decided for half the country to be rewarded by only three States being eligible for Govt. co-ownership… Why Mr ScoMo?.. This one will cost you. .And let’s face it
once for all… All those risktakers who buy properties during a boom at top prices and manage to off load them at a huge profit within weeks, are only partly to blame for the increase.. It’s the eventual buyers at Auctions who line up and bid against dummy bidders to start with ,till reserve is met ,and keep bidding as if it’s the last house for sale. …Blame them.. ,because, not only they risk loosing .but the next property they buy will be dearer still. .,so they keep going in circles. chasing their own tail.. Thank Labor for at least a glimmer of hope for those who wouldn’t have otherwise qualified to even be in the Running for the Great Aussie dream. .Personally I do not believe that any Government can really make a big difference ..and I do not believe that we have genuine deficits, when the Reserve has been printing Billions non stop.. ,and what about taxes collected from the winners from Forex trading.., where trillions of dollars change hands daily from the poor to the rich… NOW. .,don’t tell me this is all happening ..without taxes being collected from the Banks and the Elite running the show… So where is that money ? Where are the TRILLIONS? Why is it not mentioned in Budgets…?