There was some good news for certain buyers and sellers in the latest federal government Budget.
The 2021-22 Budget aims to continue Australia’s economic recovery from the pandemic, and stimulating the property market is a big part of the government’s plans, with schemes announced and expanded for downsizers, single parents and first home buyers.
We look at the four different schemes announced and how they could affect the property market on Sydney’s Upper North Shore.
The issue: Downsizers are often reluctant to leave the family home even though they sometimes have a lot of their wealth tied up in it. We help a lot of downsizers navigate the property market – both sellers and buyers – and we know the emotional, logistical and financial challenges downsizing can bring. Often it’s simply too hard. Prospective sellers can find it overwhelming and leave it too long to make a lifestyle move.
The Budget solution: The government wants to offer an incentive to downsizers to sell up and move on. They are doing this by expanding the “downsizer contribution”. This scheme was set up under the 2017-2018 Budget, to reduce pressure on housing affordability. Expanding the scheme by dropping the minimum age to 60 years will mean that more people can take advantage of making a post-tax contribution of up to $300,000 per person to their superannuation when they sell the family home. The previous cut off was 65, but the younger age will kick in as of 1 July 2021.
The issue: As part of the Budget announcement, the government said it was keen to promote the long-term social and economic benefits of home ownership. One group who frequently struggle to get onto the property ladder is single parents. Saving a deposit for a home is hard enough, let alone when you’re doing it solo. Many are also encountering difficult financial situations having gone through a divorce or property settlement. The idea is that giving single parents a hand to get onto the property ladder has the potential to build wealth and long term financial security.
The Budget solution: A new scheme called the Family Home Guarantee will allow single parents with dependents to buy a property with a 2% deposit, by guaranteeing up to 18% of the cost of the property. Thanks to the guarantee, they won’t have to pay Lenders Mortgage Insurance, which can often be expensive. Eligibility requirements mean that single parents must earn less than the income cap of $125,000, and buy a new or existing property for $700,000 or less (which is the threshold in Sydney). They can be entering the property market for the first time, or re-entering the market. 10,000 places will be made available progressively, over the next four years, starting 1 July 2021.
First Home Buyers
The issue: There’s no doubt that saving a deposit (and enough to cover Stamp Duty and other upfront costs) is one of the biggest hurdles to owning a home. This is particularly true on the Upper North Shore of Sydney. The median unit price in many suburbs is edging closer to $1 million. Putting down a 20% deposit could mean saving up $200,000 or even more. Meanwhile, the median house price in Ku-ring-gai can stretch from $2 million to over $3 million.
The Budget solution: The government announced it would expand two federal assistance schemes aimed at first home buyers from 1 July 2021, in order to help first home buyers save a deposit faster, and get on the property ladder sooner. The two schemes are:
- The First Home Loan Deposit Scheme (FHLDS). This scheme lets first home buyers get on the property ladder with a 5% deposit, with the Commonwealth government guaranteeing up to 15% of their home loan. Again, it means there is no need to pay expensive lenders mortgage insurance (LMI). From 1 July 2021, 10,000 more places will be available. Eligibility requirements mean you have to earn under $125,000 for individuals and $200,000 for couples, and the property must be worth less than $700,000 ($950,000 if it’s brand new) for Sydney
- The First Home Super Saver Scheme (FHSSS). This scheme aims to let first home owners take advantage of the lower tax rate of 15% for super contributions, by making additional contributions to their superannuation which they can then withdraw and put towards a home deposit. The Budget announced that the savings cap is being increased to $50,000 (it was previously $30,000) allowing first home buyers to save more.
These federal schemes are in addition to the State Government run First Home Owner Grant and the First Home Buyer Assistance Scheme, which offers stamp duty exemptions or concessions.
What do these Budget announcements mean for the Upper North Shore?
The government is hoping these schemes make life a little easier for these three demographics to buy a home. But they will also be helping fulfil the government’s broader goal of stimulating the economy, simply by entering into a real estate transaction.
We don’t expect overnight changes, but we do expect to see more downsizers gradually selling at a younger age, to take advantage of the downsizer contribution and add to their super balance. We also anticipate that the rising number of first home buyers will continue to increase, spurred on by expanded schemes and record low interest rates. And we’re glad to see the government offering a helping hand to single parent families to help them on a journey towards the financial security often found in homeownership.
Suburb spotlight: Waitara
Waitara has a median unit price of bang on $700,000 making it a great suburb to focus on for first home buyers, downsizers, or single parents. It’s conveniently located on the North Shore train line, moments from the services, shops and hospital at Hornsby, and close to excellent schools, cafes and parks.
If you’re interested in buying or selling in our local area, get in touch with our team today.