2% Deposit Introduced in Budget!

There's been no shortage of discussion about the impact of the COVID-19 pandemic on first home buyers since lockdowns and job losses first hit Australia

Will the housing market crash? Is it easier or harder than ever to try and get onto the property ladder? Are we all destined for a lifetime of share houses and debt?

The 2021-22 Federal Budget commits to "supporting construction jobs and home ownership" and the budget details multiple grants and schemes aimed at "helping more Australians realise their goal of home ownership", but each of those measures comes with strict eligibility criteria and significant, long-term financial commitments.

Treasurer Josh Frydenberg said in his budget speech to Parliament that while initiatives like the government's HomeBuilder scheme had been a success so far, "in this budget, our housing measures go even further".

Here's what we know about the new and extended measures.

HomeBuilder was introduced primarily to boost the private construction sector, motivating people to build new houses or significantly renovate existing homes, creating work for tradespeople and others in the industry.

But the criteria to apply for the $25,000 grants was pretty significant, with a minimum spend of at least $150,000 required to be eligible for the funding boost.

Budget papers reveal that more than 120,000 applications have been received for HomeBuilder grants since the scheme was unveiled in June last year, but does not confirm how many of those have actually been approved.

CoreLogic head of research Eliza Owen says initiatives like HomeBuilder, the First Home Loan Deposit Scheme and the first home buyer's grant likely contributed to this financial year's high participation of first home buyers in the market.

"The federal government has utilised a different approach to boosting the rate of home ownership," she says.

"They focus on increasing accessibility of mortgages, rather than risking any downward pressure on residential property prices."

The New Home Guarantee scheme helps first home owners build or purchase a new home with a deposit as low as 5 per cent.

But that means existing properties are not eligible for the scheme, which limits the opportunities for prospective first home owners living and working in capital cities or built-up areas.

The family home guarantee does extend to both new and existing homes, and isn’t limited to first home buyers.

This is a specific scheme for single parents with dependent children to lockdown a property with just 2 per cent of a deposit.

This was a significant element in the budget’s focus on women, with an estimated 105,000 of the 125,000 single-parent households expected to be eligible for the guarantee led by women.

CoreLogic's Eliza Owen says, to put it simply, lower deposits mean more debt and more debt means more interest — but in the right circumstances, could have potential.

"Taking on more debt may still be worthwhile if the borrower is otherwise spending tens of thousands of dollars on each year on rent," she says.

"Even more beneficial could be the long-term gains in real assets that come from accessing ownership earlier with a lower deposit, which could outweigh the additional interest paid."

The First Home Super Saver Scheme allows eligible first home buyers to release voluntary super contributions to put towards a house deposit.

The latest changes mean from July 1, those hopeful buyers will be able to access even more than they were previously.

Under the existing conditions, super contributions made by employers and spouse contributions can't be released under the scheme.

If you would like to know more about the Federal Budget, grants available and how it affects you and your property journey, book a call with our amazing team to discuss further.