Federal Budget 2021: How First Home Buyer Policies Affect the Real Estate Market

It’s a new way to help young Australians realize their home ownership dreams. But it may make Boomer richer.

Means of seducing older Australians from their homes to free real estate are unlikely to help young house hunters dealing with soaring prices and low inventory levels.

To Tuesday budgetThe government has announced that it will increase access to the downsizer scheme by lowering the minimum age requirement from 65 to 60.

This scheme allows older Australians to sell their homes as long as they have been in possession for at least 10 years. You can then build a one-time home. Post-tax contribution For retirement pensions of up to $ 300,000 per person or $ 600,000 per couple.

However, according to Eliza Owen, Head of Research at CoreLogic, the scheme was first announced in the 2017-18 budget and had little appetite among older people.

“It’s worth noting that in the nearly three years since the scheme came into effect, it has only been accessed by about 22,000 people, so it may not be substantially added to the supply,” she explained.

According to CoreLogic figures, housing demand remains high despite the low supply of available properties, with total listings 23.4 percent below the five-year average.

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The· New policy According to Owen, it will kick off in July 2022, which is also problematic given the current climate.

“This means that ambitious downsizers between the ages of 60 and 64 may wait for the scheme to come into effect before they sell, and the resulting increase in listings will only affect the housing market. Will give, “she said.

Dr. Andrew Wilson, Chief Economist at real estate technology and design firm Archistar, agreed that the plan had limited success and was due to the lack of suitable next-stage downsizer accommodation.

“Degraded age eligibility only exacerbates this problem, and the established central and inland suburbs clearly lack affordable medium-density and larger dense-density housing.” He said.

“Availability of appropriate suburban downsizer accommodation may take precedence over financial incentives, especially in young demographics.”

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“Sweet” deals for old Australians

However, Dr. Brendanlin, chief economist at KPMG, said the government “as sweet as possible” to encourage older Australians to sell out by lowering the age of access to the scheme.

“Older people get harder to move, so it’s good to get older,” he told

We don’t see older Australians rushing to sell their homes to become wealthy, but the reasons people stay and choose to move aren’t just based on the economy.

“The majority are related to how people feel about their homes, property, and their movements and emotional connections with all sorts of things, and they are still a major barrier for people to overcome. “He said.

“What this measure does helps to provide a little more incentive to help balance the equation of thinking about staying or moving. Also, demographic changes and children in later years By the age of 60, even if born, the vast majority of people no longer have young children at home, making them smaller and smaller in size, but still meeting their needs. “

Hot housing market can seduce old Australians

Dr. Lin also dismissed the claim that the plan had not been very successful so far, and when it was launched, the real estate market was “relatively soft” for several years and only recovered after the COVID-19 hit. He pointed out that he started.

“When you want to sell, people who don’t have a mortgage and don’t need to sell can afford to wait for the market to improve, so it’s not surprising that they didn’t have that many takes. The real estate market was relatively weak, so we surpassed it. ”

“As the market gets stronger, sales can grow. I don’t think recent history is a good comparison of how this will work in the coming years.”

The scheme could also have a positive effect on first-time homebuyers, Dr. Lin predicted. He believes that current homeowners will move to larger homes, rather than retirees who sell directly to young Australians, and free homes for the first homebuyers.

The federal government said in its budget that the downsizer system would give Australians, especially those with a good balance with women, more flexibility to contribute to their aging.

“To date, about 55% of people who have used Downsizer’s contributions are women, and 73% have less than $ 500,000 in balance,” the newspaper said.

Help for first home buyers

A new and strengthened policy aimed at helping first homebuyers access the market was also announced in the budget.

This included a family home guarantee that allowed single parents with a maximum annual income of $ 125,000 to buy a home with a minimum deposit of 2%.

However, this is limited to local market price caps, including $ 700,000 in Sydney, $ 600,000 in Melbourne and $ 475,000 in Brisbane, and the scheme is limited to 10,000 locations.

Dr. Wilson said the current market conditions mean that people can still be priced.

“Applicants with the largest income profile can borrow about $ 500,000 at current interest rates, but in Sydney and Melbourne, which still generate the majority of the first homebuyers in the country, suitable family homes. There are few options to buy, “he said. ..

The current median value for a two-bedroom unit in Sydney is $ 615,000 and a three-bedroom unit is $ 820,000.

In Melbourne, the median two-bedroom unit is $ 520,000 and the median three-bedroom unit is $ 585,000.

For Brisbane, the median two-bedroom unit is $ 400,000 and the median three-bedroom unit is $ 560,000.

“By comparison, the average asking price for homes in Sydney is currently $ 1,297,077, Melbourne is $ 869,490 and Brisbane is $ 568,992, all of which are clearly still significantly higher,” said Dr. Wilson.

Low deposits mean that you have to pay more debt and more interest over the entire term of the loan, Owen added.

She explained that if Australia’s entry-level asset value is $ 431,194, a 20% deposit mortgage at a 2.4% interest rate will accrue about $ 121,000 on monthly payments for a 25-year mortgage. did.

“The same borrowing with a 2% deposit will have an interest rate of about $ 145,000. If the borrower spends tens of thousands of dollars on rent each year, it may still be worth taking on more debt. No, “she said.

The government has also reintroduced a new home guarantee that will allow first homebuyers with the highest incomes of couples under $ 200,000 to secure a new home with a deposit of at least 5%. The maximum price for this scheme is $ 950,000 in Sydney, $ 850,000 in Melbourne and $ 650,000 in Brisbane, again limited to 10,000 locations.

“This scheme is built on previous successes and offers more opportunities for first-time homebuyers, but the current boom in new homebuilding will lead to supply constraints and higher construction costs. It’s set up and clearly supports content with suburban fringe living, “Dr. Wilson said.

Need to do more

An extension of the First Home Buyer Super Saver Scheme could increase member donations from $ 30,000 to $ 50,000, but the changes will take effect from July 2022, so short-term implications are unlikely.

“The federal government has announced several targeted budget initiatives to help some of the first homebuyers realize Australia’s great dreams,” said Dr. Wilson.

However, rising house prices and a surge in investors are unlikely to significantly stop the group’s continued decline in activity, and even with full scheme adoption, total activity next year will decline by at least 20%. It’s a schedule. Announced.

“But the overall decline potential for first-time homebuyers is offset by increased investor activity to maintain upward pressure on home prices. This is a headache for first-time homebuyers. ..

“Comprehensive and targeted supply-side initiatives are needed to align with demand-stimulating police, which are clearly more urban sprawl, turmoil in surrounding life, marginalization of the suburbs, and It brings about a rise in overall home prices. “

Federal Budget 2021: How First Home Buyer Policies Affect the Real Estate Market

Source link Federal Budget 2021: How First Home Buyer Policies Affect the Real Estate Market

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