Budget boost for first time buyers, downsizers

First homebuyers, single parents and downsizers are among the biggest beneficiaries in the property sector from this week’s federal budget, but some experts are questioning how effective the new schemes will be against a backdrop of sky-high house prices.

Treasurer Josh Frydenberg this week announced a suite of measures designed to break down the barriers to entry in property markets, offering low-deposit options for single parents and first time buyers, as well as incentives for older Australians to downsize.

Family Home Guarantee

Mr Frydenberg said 10,000 guarantees would be made available for the next four years for single parents, allowing them to buy a home with a deposit of as little as 2 per cent.

The scheme will be limited to those with an annual income of $125,000 or less.

New Home Guarantee extension

The Treasurer also announced that an additional 10,000 first homebuyers seeking to build a house or buy a newly built home would be able to do so with a 5 per cent deposit, with the federal government to guarantee the remainder. 

First Home Super Saver Scheme

While also not a new scheme, Mr Frydenberg announced a slight change to the government’s assistance measures for those saving a deposit.

Under the scheme, first home buyers could make voluntary contributions of up to $15,000 per year to their superannuation fund to take advantage of the special tax treatment of super funds. 

This week’s budget raised the maximum amount that can be saved under the scheme from $30,000 to $50,000.

Downsizer incentives

From July 1 next year, older Australians aged 60 and above will be able to make a post-tax downsizer contribution to their superannuation when they sell their family home.

The age limit was previously 65 and up, with the change designed to encourage older Australians to downsize earlier.

Real Estate Institute of Australia president Adrian Kelly said the budget addressed many of the property industry’s needs, welcoming in particular the expansion of the First Home Super Saver and First Home Loan Deposit Schemes.

Mr Kelly said, however, that while assistance for first homebuyers was a key component of the budget, he would have preferred more clarity around deregulation and for interest payments for first time buyers to be tax deductible. 

“We will continue to advocate for first homebuyers to have the ability to claim interest payments as a tax deduction which will be crucial in years to come when interest rates start to rise,” Mr Kelly said.

Archistar chief economist Andrew Wilson was more critical, saying there were several limitations that would undermine the effectiveness of the new initiatives.

Mr Wilson said price ceilings would put a handbrake on the Family Home Guarantee, with the maximum values for property purchases to significantly limit the options for prospective buyers. 

The ceilings have been tailored for local markets, with the maximum value set at $700,000 in Sydney, $600,000 in Melbourne and $475,000 in Brisbane.

“Applicants with the maximum income profile will be able to borrow around $500,000 at current interest rates, which will nonetheless leave few options to purchase appropriate  family-friendly homes - particularly in Sydney and Melbourne that generate the majority of  first home buyers nationally,” Dr Wilson said.

"The current median asking price for a 2 bedroom unit in Sydney is $615,000 with a 3 bedroom at $820,000. In Melbourne the 2 bedroom unit median is $520,000 with 3 bedroom unit median asking prices at $585,000. 

“For Brisbane the 2 bedroom unit median is $400,000 with 3 bedroom unit median asking prices at $560,000. 

"By comparison the median asking price for a Sydney house is currently $1,297,077 with Melbourne at $869,490 and Brisbane $568,992, and all clearly still rising strongly.”

Mr Wilson said the changes to downsizer incentives would also produce a limited impact.

"The scheme has had limited success in significantly accelerating downsizing since its introduction in the 2017-18 budget, clearly impeded by the lack of suitable next-stage  downsizer accommodation,” Mr Wilson said. 

"The reduced age eligibility will only exacerbate this issue, with the clear shortage of reasonably affordable, medium-density and larger higher-density dwellings in established  middle and inner suburbs. 

“The availability of appropriate suburban downsizer accommodation likely takes priority over financial incentives, particularly for a younger demographic.”

On the flipside, Ray White Group managing director Dan White said he considered the big spending budget as great news for the property industry, with the property-related measures to ensure homebuyers remained confident.

Mr White said the targeted nature of the First Home Super Saver and Family Home Guarantee would allow young people and single parents to make competitive bids for houses and assist them in saving a deposit.

“We’ve found that when governments have tried to improve housing affordability in the past it’s unfortunately tended to lift property prices but this is the first time I can remember that a federal policy has been this targeted,’’ Mr White said.

“Home ownership is crucial to stability in life. The sooner you can get your first home the better off many people are.”

Master Builders Australia chief executive Denita Wawn said builders and tradies would strongly back the budget, saying it was a boost of confidence for the construction industry that Australia’s economic recovery could “continue to largely ride on the ute’s back.”

Ms Wawn said Mr Frydenberg had doubled down on his first pandemic budget, with the extension of the instant asset write-off scheme to be welcome news for the industry, in addition to subsidies provided for small businesses to upskill and acquire new technology.

“Building and construction SMEs have one of the lowest rates for uptake of technology,” Ms Wawn said.

“The Government’s investment in improving digital skills and capacity can make our industry even more productive.

“This Budget has linked good economic policy with good social policy.

“Home ownership is the key to economic security and vital for a strong economy. 

The Family Home Guarantee will be life changing for single custodial parents, the vast majority of whom are women. 

“Combined with 10,000 new places under the New Home Guarantee it will and will mean that the people who build new homes and the people that want them continue as the lynchpin of recovery.”

Stone Real Estate chief executive Peter Mumford was also effusive in his praise for Mr Frydenberg’s budget.

“The budget announcement regarding the age extension on the downsizer scheme was great to see and I think it will really help older Australians who are nearing retirement age and are asset rich and cash poor,” Mr Mumford said. 

“The scheme should also target regions where supply is a problem, which will help ease property prices and open the door for young Australians who have been locked out of desirable regions. 

“The new home guarantee measures to support single-parent families and first home buyers are also very important initiatives and given Australia’s robust property market, they are much needed. 

“It’s great to see government support for those who are struggling to get on the property ladder and I hope we see great results from these schemes.”