The Labour government recently released its pre-election budget, but what’s new in it? Will it provide more housing support for borrowers and lenders now? Or will the houses get more affordable? What’s it all about?
The growing housing crisis is significantly encouraging good news from the government. Research reveals that young Australians are the primary victims of this housing crisis. As a result, the federal government extended its support for home buyers to around $800 million under the Help-To-Buy Scheme. Meanwhile, the government’s total commitment will be $6.3 billion to improve housing affordability.
What Does It Mean to Homebuyers?
This improvement means that more homebuyers can now enter the property market at affordable home prices. Moreover, the scheme will help up to 40,000 buyers by covering up to 40% of a new home’s cost or 30% for existing homes.
Income criteria also increased to $100,000 for singles and $160,000 for couples, expanding eligibility for housing support programs. That means now the homebuyers will get some relief from the previous strict eligibility criteria. Meanwhile, it will help limit their borrowings, making home buying more affordable and accessible for them.
Changes to HECS Debt
The federal government also announced that it will now wipe off 20% of the debt associated with the Higher Education Contribution Scheme (HECS). Such a step will ultimately improve the borrowing capacity with the increasing home-buying trend. This is because there will be more borrowing to buy homes due to easing eligibility criteria.
APRA confirmed these reliefs by bringing potential adjustments such as,
- Discounts in HECS debts from debt-to-income ratios.
- The removal of outstanding HECS balances that are to be repaid within 12 months from serviceability assessments.
However, lenders now need to ease their eligibility criteria to support the government’s decision. As a result, the property market will see a rise in housing demand, putting more pressure on the housing supply. So, how will it impact the housing construction trend then?
Increase in Housing Construction Trend
Likewise, the federal budget further allocated a $49.3 million budget to housing construction industries. The aim behind this is to increase the construction of more houses in less time and cost. Additionally, the government allocated $4.7 million to fast-track offsite builds and approvals. For this, the government mainly found modular and prefab houses as a more affordable way to build.
This way the homebuyers can purchase homes at lower construction costs with less financial pressure on them. Furthermore, it will help the government fulfil its goal of building 1.2 billion new homes between 2024 and 2029.
Although only 45,000 homes were built in Quarter 1, the numbers will rise as initiatives and funding for housing construction expand. So, overall, we can expect a rise in housing construction. However, it will be deemed to impact the property prices too, which might raise concern for homebuyers and the government.
Budget Support for Housing Australia
The government even extended its budget support for Housing Australia to $4.9 million for the upcoming four years. As a result, it will increase funding support for programs like the Home Guarantee Scheme, Regional Home Guarantee, and Family Home Guarantee. This will allow eligible buyers to buy with as little as a 2% deposit with no Lenders Mortgage Insurance obligation.
Meanwhile, the federal budget decision will not create any major impact on interest rates. This is because it’s likely to depend on RBA’s decision to hold the cash rate. As a result, we can expect mixed outcomes in the property market.
So how should homebuyers plan their investments?
To get all the valuable consultation contact us at Nfinity Financials or reach out to our experts at 1300 GET LOAN or 0456 456 267.
