More than 4,600 needy Australians could get help to buy their first home in an overheating market under a federal government home guarantee scheme.
The program helps first home buyers and single-parent families get their own home sooner with mortgage deposits of just five per cent and two per cent respectively, instead of the usual 20 per cent.
Under the scheme, the government would reissue up to 4,651 unused guarantees for first home buyers from the 2020-21 financial year who were unable to buy their first home, with Covid lockdowns taken into account.
Australian property prices have surged by 22.2 per cent during the past year, with first-home buyer numbers dropping for nine consecutive months in 2021, sparking debate about reintroducing death duties as baby boomers benefit at the expense of the young.
House prices have soared in capital cities and regional areas, locking out many potential first-home buyers.
More than 4,600 needy Australians could get help to buy their first home in an overheating market under a federal government home guarantee scheme(pictured is a house at Torquay on Victoria’s Surf Coast)
With Australian property prices rising at the fastest pace since 1989, Prime Minister Scott Morrison is vowing to get more younger people into real estate.
‘We want more first-home buyers to get into the place of their dreams,’ he said.
‘The pandemic and lockdowns have interrupted the plans of many home buyers this year, so this is about ensuring we give thousands more families the opportunity they need.’
Housing Minister Michael Sukkar said that combined with HomeBuilder subsidies and the first home super saver scheme, more than 300,000 Australians had been helped into home ownership.
This included almost 60,000 Australians through the home guarantee scheme.
‘The Morrison government will continue to provide Australians who have that aspiration to go and buy a home, the opportunity to go and achieve that,’ Mr Sukkar said.
Mr Sukkar said the government was on the side of essential workers and women as ‘they make the leap into home ownership’.
But Australian real estate is now so expensive the national median house and unit price of $698,170 would see an average-income earner struggle to repay a loan.
The program helps first home buyers and single-parent families get into their own home sooner with a deposit of as little as five per cent or two per cent respectively. Under the scheme, the government would reissue up to 4,651 unused guarantees for first home buyers from the 2020/21 financial year who haven’t had an opportunity to purchase their first home, including because of Covid disruptions (pictured is an auction at Hurlstone Park in Sydney’s inner west)
Even with a 20 per cent deposit, a full-time worker on a $90,329 salary, with a $558,536 mortgage, would be saddled with a debt-to-income ratio of 6.2.
The Australian Prudential Regulation Authority considers a debt ratio of six to be dangerous and on Tuesday released new data showing 23.8 per cent of new borrowers in the September quarter of 2021 were in this category.
That is a big jump from the 16.3 per cent proportion a year earlier.
In the year to November, property prices across Australia rose by 22.2 per cent – the fastest annual pace since 1989, CoreLogic data showed.
In Sydney, house prices soared by 30.4 per cent to an even more ridiculously unaffordable $1.36million.
Victoria’s Surf Coast, south-west of Melbourne, has a median house price of $1.4million, making it one of six regional areas with a mid-point house price in the seven figures alongside Byron Bay, Ballina, the NSW Southern Highlands, Kiama on the NSW Coast and Noosa in Queensland.
Stephanie Asher, the Liberal Party’s candidate for Corangamite covering this area, suggested the scheme could help young people afford a home in an area offering a good lifestyle.
‘With so many young people and families moving to Geelong, the Surf Coast and the Bellarine, this is about making it easier to make home ownership a reality,’ she said.
‘It’s programs like this that will help even more people see the great lifestyle and opportunities our region has to offer.’
First-home buyer numbers fell by 3.8 per cent in October, marking the ninth consecutive monthly decline, and a 29.9 per cent plunge from the peak in January 2021, Australian Bureau of Statistics data showed.
The Reserve Bank on Tuesday left the cash rate on hold at a record low of 0.1 per cent but Governor Philip Lowe issued a warning to borrowers.
‘With interest rates at historically low levels, it is important that lending standards are maintained and that borrowers have adequate buffers,’ he said.
With Australian property prices rising at the fastest pace since 1989, Prime Minister Scott Morrison is vowing to get more first-home buyers into the market
The Morrison government introduced a $500million First Home Loan Deposit Scheme in 2019 after the election, with financing provided by the new National Housing Finance and Investment Corporation.
During the onset of the pandemic, the Reserve Bank of Australia introduced a Term Funding Facility that gave funding to the banks to provide cheap housing and business loans.
Between March 2020 and June 2021, the RBA gave out $188billion, which saw the major banks slash their fixed rate to levels below two per cent and fuel a property price surge.
Dr Lowe could end up being Australia’s last boomer baby governor of the Reserve Bank who left a bad legacy for young, first-home buyers.
In September, he ruled out raising interest rates early to ‘cool the property market’.
Victoria’s Surf Coast, south-west of Melbourne, has a median house price of $1.4million (pictured is a home at Torquay), making it one of six regional areas with a mid-point house price in the seven figures alongside Byron Bay, Ballina, the NSW Southern Highlands, Kiama on the NSW Coast and Noosa in Queensland. Stephanie Asher, the Liberal Party’s candidate for Corangamite covering this area, suggested the scheme could help young people afford a home in area offering a good lifestyle
‘I want to be clear that this is not on our agenda,’ he said.
The intergenerational divide caused by surging property prices also means younger people will only be able to afford a home if their parents are rich.
The Productivity Commission noted inheritances in 2018 had climbed to $52billion, more than doubling from $24billion in 2002.
‘Over the past two decades, wealthier people inherited more than poorer people,’ it said.
Philip Lowe could end up being Australia’s last boomer baby governor of the Reserve Bank who left a bad legacy for young, first-home buyers. The Productivity Commission noted older people owned a lot more real estate which would worsen inequality (pictured is an auction at Strathfield in Sydney’s inner west)
The report noted the rising wealth of baby boomers was likely to worsen wealth inequality.
‘Projected growth in inheritances is partly driven by rising wealth among older age groups, who hold a disproportionately large share of wealth in the future,’ the Productivity Commission said.
‘Housing wealth is a significant factor driving these outcomes. Older age groups own more housing wealth, they draw down on that housing wealth slowly, and they inherit large housing wealth from their partners in old age.’
The federal government abolished inheritance tax, colloquially known as ‘death duties’, in 1979 with no major party willing to reintroduce them.