Federal Budget 2020 reignites the Australian dream of home ownership

GovernmentPropertyBudget

7 October 2020

For many people being a home owner has always been the Australian dream. But in these uncertain times is that dream still possible, or even still relevant for many potential home owners?

Based on the announcement in last night’s Federal Budget 2020/21 that the first home loan deposit scheme will be extended to an additional 10,000 home buyers, it’s evident the Government still considers new home ownership to be an important measure to help stimulate Australia’s way out of the COVID-19 recession.

In a housing market that has boomed in recent years, many potential new home owners have been priced out of buying new homes due to their incapacity or inability to save the 20 percent deposit ordinarily required to enter the property market.

Now, under the extended scheme, eligible participants will be able to purchase a new home with a deposit of as little as five percent, with the government guaranteeing the other 15 percent of the deposit.

The extension of the first home loan deposit scheme will run until 30 June 2021 and be limited to buyers who are building a new home or buying a newly constructed home. This differs to the existing scheme, which applies to both new and existing homes. The timeframe and eligibility limitations on the extended scheme are intended to focus further immediate and ongoing investment in the residential construction industry.

New price caps for the extended scheme will also apply on the basis that newly built homes may be more expensive to purchase for first home buyers than existing homes. These price caps vary between States and Territories and are higher for capital cities and regional centres than for other areas.

Access to the extended scheme, when coupled with the previously announced HomeBuilder program, should enable many potential new home owners to take the plunge and enter the market. There will also be scope for eligible first home buyers to take advantage of the First Home Super Saver Scheme and any applicable State or Territory first home owner grants or concessions.

Historically low interest rates now and in the foreseeable future also make the cost of home loan debt comparatively more affordable to new home owners than ever before, meaning those who have at least some portion of a deposit may be keen to dive into the market now.

Given the current economic climate, potential first home buyers may not have had the opportunity to save a standard deposit for a new home even where they have been actively saving. In such circumstances the extended scheme may be applicable in providing the opportunity here and now for those who are currently considering buying a first home, whilst providing some much-needed stimulus for the residential construction industry.

For more information on how you can take advantage of the extended home loan deposit scheme, talk to your adviser or contact the Findex Tax Advisory team.

For more Federal Budget coverage and news as it comes to hand, visit ourFederal Budget Resource Centre.

Author: David Penpraze

With over 15 years’ experience in as an adviser in the indirect tax industry, David’s specialist skills include compliance and advisory in relation to GST, stamp duties and land tax. He specialises in Australian and cross-border transaction advice across a broad range of industries including property, financial services and government....