As the election approaches, lets break down what the Labor and Liberal parties’ promises are for homebuyers.
LABOR PARTY
Labor is promising to assist eligible Australians in purchasing homes through a shared equity arrangement with the government.
Government Equity Contribution:
- Up to 40% of the purchase price for new homes.
- Up to 30% for existing homes.
- This reduces the amount buyers need to borrow, leading to smaller mortgage repayments.
Buyer Requirements:
- Deposit: Minimum of 2% of the property’s purchase price.
- Mortgage: Secure financing for the remaining share from a participating lender.
- No requirement to pay rent on the government’s equity portion.
Eligibility Criteria:
- Citizenship: Australian citizen aged 18 or over.
- Income Caps of $100k for singles, and $160k for couples, or single parents.
- Property Ownership: Must not currently own any other property in Australia or overseas (OK if you owned property in the past).
- Residency: Must live in the purchased property as the primary residence.
- Property Price Caps will vary by region, for example Sydney price cap will be $1.3m, Melbourne’s will be $950k and Brisbane’s will be $1m
Scheme Availability:
Limited to 10,000 places per year over four years, totaling 40,000 participants with applications expected to open later this year.
Repayment of Government Equity:
Participants can choose to repay the government’s share over time or upon selling the property. Note that if the property value increases, so does the value of the government’s share.
LIBERAL PARTY
The Coalition has proposed several initiatives aimed at assisting homebuyers if they are elected including:
Reducing the Mortgage Serviceability Buffer:
They plan to direct the Australian Prudential Regulation Authority (APRA) to lower the current 3% serviceability buffer applied to home loan applications. This will significantly boost borrowing power. There is an indication the APRA buffer will be reduced to the pre-covid level of 2.5%
Reforming Lenders Mortgage Insurance (LMI) Regulations:
The Coalition intends to adjust APRA’s treatment of loans backed by LMI (over 80% LVR). The aim here is to remove the requirement currently imposed on banks by APRA requiring them to hold additional capital against LMI-backed loans. This should remove the premium that banks chanrge on some LMI-backed loans, making them cheaper.
Accessing Superannuation for Home Deposits:
They propose allowing first-home buyers and separated women to access up to $50,000 of their superannuation savings to use as a home deposit.
Reducing Permanent Migration:
The Coalition plans to reduce the permanent migration program by 25%. This policy aims to alleviate demand in the housing market, potentially easing competition and making housing more accessible for Australian citizens.
Each approach has its benefits, and the impact of these policies will depend on how well they meet the needs of homebuyers. As the election approaches, what the Labor and Liberal parties’ promises homebuyers are will play a key role in shaping the future of homeownership in Australia.