What the 2021 Federal Budget means for the property market
The 2021 Federal Budget, announced earlier this week, includes a number of additional measures that will serve to assist Australians seeking to secure their own home.
As part of the First Home Super Scheme, first-home buyers will be able to release $50,000 from special accounts within their super funds, up from the $30,000 maximum withdrawal since the scheme began four years ago. The caveat being that first-home buyers must live in the properties they buy with the released super funds.
The government also announced the newly established Family Home Guarantee, which is an expansion of the New Home Guarantee. The Family Home Guarantee is designed to assist single parents with dependents by allowing them to purchase a home with as little as a two percent deposit.
Finally, the Government is planning on extending the New Home Guarantee for a second year, allowing 10,000 first-home buyers to build a new home or a buy a newly built home on as little as five percent deposit, with the government acting as guarantor on the loan, freeing the buyer from incurring lender’s mortgage insurance (LMI). The 10,000 new places will only be available for individuals with taxable incomes of less than $125,000 and couples with taxable incomes of less than $200,000 and they cannot have owned a property before seeking help.
The Property Council of Australia said these initiatives would assist the residential sector as it continued to drive Australia’s economic recovery.
“These schemes are targeted to help first home buyers bridge the deposit gap and bring the aspiration of home ownership within reach of a broader range of Australians,” said Property Council Chief Executive Ken Morrison.
The Government’s additional measures are a part of its broader plan to secure Australia’s recovery post-pandemic. These measures will indeed be a huge help for many people on the path to purchasing their first property, due to the fact the deposit gap is often considered the greatest barrier to home ownership.
At the other end of the spectrum are the changes to be put in place for downsizing retirees. The Government is attempting to tackle the lack of stock on the market for young families by making amendments to the downsizer contribution scheme. The Government will reduce the eligibility age to make downsizer contributions into superannuation from 65 to 60 years of age. The downsizer contribution allows people to make a one-off, post-tax contribution of up to $300,000 per person (or $600,000 per couple) from the proceeds of selling their family home.
Treasurer Josh Frydenberg endorsed the move.
“This improves the flexibility for Australians to contribute to their superannuation savings and may encourage people to downsize sooner and increase the supply of family homes.”
The measures the Government have put into place, combined with the existing low interest rates, ultimately allow a greater pool of first-home buyers to access home loans. Similarly, the downsizer contribution measure has been positioned as another positive move for buyers as it should work to free up stock for younger people hopeful to get into the market.
So, what do all these changes mean for the market?
The Government has put in place a number of incentives to encourage home ownership in Australia, particularly for first homeowners. With rental markets still challenged in the short to medium term due to the lack of incoming overseas students and migration stalled for the immediate future, demand for affordable housing is likely to remain strong as local buyers compete for available stock utilising these incentives and current record low interest rates. This strong underlying buyer demand is likely to continue to see robust competition for housing at the affordable end of the market.
The changes to the downsizer superannuation contribution limits may see the surge in sea and tree change lifestyle demand continue with sellers of large family homes looking to relocate and free up capital. Listings for quality family homes remain tight with a surplus of available buyers in the market with overseas based Australians looking to repatriate. Any increase in stock levels is likely be absorbed by this strong demand that should see the current strong market conditions maintained for the foreseeable future.
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