Add CategoryA scheme that helps first-home buyers has been expanded as part of the federal budget, with the focus now on whether there will also be an extension of HomeBuilder and any boost for social housing.
Ahead of Tuesday’s budget, the federal government announced an additional 10,000 places under its First Home Loan Deposit Scheme for people buying new homes.
Industry groups hope the government’s big-spending budget will also contain further measures to boost housing construction.
An extension to the First Home Loan Deposit Scheme has been announced ahead of the federal budget. Picture: Getty
Realestate.com.au’s executive manager of economic research Cameron Kusher and AMP Capital chief economist Shane Oliver had forecast possible expansions of the First Home Loan Deposit Scheme and HomeBuilder in the budget.
“Without people migrating to Australia, you do have a missing source of demand for housing, and first home buyers are already starting to fill that gap,” Mr Kusher said.
“The challenge is there’s only ever at one point in time a finite number of people who are able to have a big enough deposit and get into the market.”
Dr Oliver noted underlying unemployment was high and the coronavirus hit to immigration posed a threat to housing construction until investment levels were restored.
“They’re probably not aiming for a housing construction boom, they just want to keep up the level of construction activity until immigration is returned,” he said.
First-home buyer scheme expanded
Assistant Treasurer and Housing Minister Michael Sukkar on Saturday announced an additional 10,000 places under the First Home Loan Deposit Scheme to support the purchase of a new home or newly-built home.
That was on top of the existing arrangements that provided a guarantee for up to 10,000 eligible borrowers per financial year to purchase a home with a 5% deposit.
Mr Sukkar said the scheme had been a raging success since it began in January 2020.
“We’ve seen nearly 20,000 Australians take up or access a First Home Loan Deposit Scheme guarantee,” he said.
The expansion of the First Home Loan Deposit Scheme will support residential building jobs. Picture: Getty
Housing Industry Association managing director Graham Wolfe said the focus of the extension exclusively on new homes was a very strong boost for the residential building industry and would support tens of thousands of jobs.
Master Builders Australia CEO Denita Wawn said the scheme was a proven success story and its expansion would help save jobs and keep businesses afloat.
“Expanding it for new homes ticks all the right boxes to help us build our way to economic recovery,” she said.
But Real Estate Institute of Australia president Adrian Kelly questioned the focus on new or newly-built homes, saying it ignored the market preferences of Australian first-home buyers who mainly purchased established dwellings.
“Historically we have seen that less than 20% of first-home buyers buy new homes,” Mr Kelly said.
“In more recent times even fewer small home buyers are choosing new dwellings.”
In its pre-budget submission, the REIA said the scheme should be expanded to include all first-home buyers.
Dr Oliver speculated that the government may announce a grant targeted at first-home buyers, possibly as part of an extension to HomeBuilder.
“There is an issue as to what happens when we go into next year and the JobKeeper and JobSeeker supplements and bank payment holidays wind down,” he said.
“I think the government will probably be keen to try and head off the negative impact of that on the housing market, and that could lead to something like a first-home buyer grant or generally a home buyer grant of some form.”
HomeBuilder may be extended
Economists and the industry believe the government may extend the HomeBuilder scheme, which provides a $25,000 grant to build a new home or substantially renovate an existing home.
Property groups want the $680 million program extended beyond its 31 December end date.
Property Council of Australia group executive, policy, Mike Zorbas said it made sense for HomeBuilder to be extended for a further six months, and for it to move to a six-month unconditional commencement window. Currently construction must commence within three months (six months in Victoria) of the contract date.
“HomeBuilder has been a vital shot in the arm for residential construction,” Mr Zorbas said.
“Every $1 million spent on residential construction supports nine jobs.
“It’s a highly efficient stimulus measure that delivers a great economic return.”
In its pre-budget submission, Master Builders Australia called for a 12-month extension to HomeBuilder at a cost of $1.3 billion.
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The REIA’s submission recommended reducing the lower limit for renovations – currently $150,000 – to encourage a greater uptake of the program.
The property industry wants the HomeBuilder program extended in the federal budget. Picture: Getty
Mr Sukkar indicated a decision on extending HomeBuilder was likely to be made closer to 31 December.
“We’re looking at it very closely and we’ll make a decision once the program rolls out closer to that deadline,” he said.
Calls to boost social housing
Community and housing organisations have advocated for significant new investment in social housing to reduce homelessness and create construction jobs.
But federal ministers have repeatedly argued the states have the primary responsibility for social housing.
Mr Kusher said the state and federal governments should do more about social and affordable housing to help homeless people and stimulate the economy.
“There’s already a big requirement for it but we may see additional demand for social housing coming off the back of this recession,” Mr Kusher said.
Mr Kusher said the federal government may take action through the National Housing Finance Investment Corporation to encourage the states to do more on social housing.
Rate cut a possibility on budget day
A number of economists believe the RBA will cut the official cash rate from its record low of 0.25% to 0.1%, possibly as soon as its October meeting on Tuesday.
Dr Oliver argued a rate cut on budget day – as occurred in 2016 – would present a united “Team Australia” front with the federal government.
But he believed it was now 50-50 as to whether the cut would happen in October or November.
Mr Kusher said a rate cut in November was possible, but the RBA may decide to wait until after support measures such as mortgage repayment holidays, JobKeeper and JobSeeker ended early next year.
“I think they’d be a little bit better off saving some powder in the keg if we really need it next year.”