Australia’s housing market is one of the most expensive in the world. According to Demographia’s International Housing Affordability (2022), Sydney is the second most expensive city to buy a house in. Fifth on the list is Melbourne.
Data shows that if you live in Sydney, you would need to save 15 times your income to afford an average-priced home there. In Melbourne, the number is 12. Do the math and let the numbers baffle you.
Now, with the incoming government led by the Australian Labor Party, some things are about to change.
Help To Buy Scheme
At the top of Labor’s housing plans is the Help To Buy Scheme. This scheme aims to make Australian homeownership affordable to 10,000 eligible applicants. The government will shoulder 40% of the price of a new home and 30% for existing houses. This will leave the homebuyer a considerably more affordable amount left to take out a mortgage.
At the same time, this will lower the needed deposit to as low as 2%. Homebuyers who qualify for the scheme do not have to pay lenders’ mortgage insurance (LMI) as well.
If you qualify for the scheme and have your eyes set on a property at the price cap of 950,000 for Sydney, you will have a low monthly mortgage. With a 40% stake in the house, the government will leave you with $570,000. With a 2% deposit at a 2.5% interest rate for a loan term of 30 years, that is a monthly repayment of $2200. That is around $1400 in savings every month. To get an idea with a specific property price in mind, you can try this mortgage calculator.
Of course, the government owns 40% of your house. But you can buy the shares from the government when you are capable. The minimum share you can buy is 5%.
Regional First Homebuyer Support Scheme
On the regional level, Labor proposes to guarantee 15% of the property price for first home buyers. If this is familiar, it’s because it’s similar to the current New Home Guarantee. This time, however, the scheme is particular to homebuyers outside of capital cities.
With a 15% guarantee, you only have to put down a 5% deposit. And you will not be charged with LMI, too. The scheme will be implemented starting January 2023.
National Housing Supply and Affordability Council
Aside from schemes to help make mortgages affordable to homebuyers, the Labor Party also plans to consolidate a council to address housing supply issues. Housing supply has always been one of the main reasons why house prices soar in Australia. There isn’t a supply for low-income earners and the property market remains to be out of reach for many.
The National Housing Supply and Affordability Council will take advice from industry experts in finance, urban planning, construction, social housing, etc.
The Labor government will also focus on developing the National Housing and Homelessness Plan to forward reforms.
Housing Australia Future Fund
Labor also looks at creating a $10 billion Housing Australia Future Fund. The focus will be on social housing and the creation of jobs in the construction industry.
The main beneficiaries of the fund are women and children who were victims of domestic violence. Older women earning low income and are at risk of being homeless are also the main beneficiaries.