Help for first-home buyers and single parents to own a home and continuation of an income tax break for low and middle income workers are among key measures that will put more cash in the pockets of Australians following the 2021-22 federal budget.
There is an the increase in the First Home Buyer Super Saver Scheme to a maximum of $50,000, up from $30,000, that can be withdrawn from superannuation to put towards a house deposit. The increase comes into effect on July 1, 2022.
There are annual contribution caps to how much can be made in voluntary contributions that have to be saved in super first, under the scheme, before the money can be withdrawn.
Pension loan scheme
There are changes to the Pension Loan Scheme which allows almost anyone who owns a property and has reached pension age to take out a “reverse mortgage” from the government, where the balance of the loan is repaid when the property is sold.
The scheme pays an income up to an amount that is equal to the maximum age pension.
Under changes that come into effect from July 1, 2022, up to 50 per cent of the maximum annual age pension can be accessed as a lump sum each year. The total amount accessible under the scheme has not changed.
“[The change] is important as it could allow older Australians to access the capital in their home to pay for large, one-off items, such as medical services or home repairs, which they may not otherwise be able to afford,” says Colonial First State general manager Kelly Power.
To help free-up homes for younger families, from July 1, 2022, those aged at least 60 will be able to make a one-off contribution of up to $300,000 per person, or $600,000 per couple, to their super when they sell a home that they have owned for at least 10 years. The qualifying age is currently 65.
Jason Murray, chief of member experience at QSuper, says the downsizer contribution allows retirees to move to more suitable housing as their family size drops and to turn the capital tied up in their home into retirement income.
Family Home Guarantee
The newly introduced Family Home Guarantee (FHG) allows single parents with a maximum annual income of $125,000 to purchase a new or existing home with a minimum deposit of 2 per cent. It is available for property purchases of up to $700,000 in Sydney and $600,000 in Melbourne.
The scheme is limited to 10,000 places over four years; though, if the uptake is strong, the government could well add more places. The scheme starts on July 1.
Eliza Owen, head of research Australia at CoreLogic, says single parent households are largely headed by women, making up about 64 per cent of lone parent and lone-adult households.
“As a result, this policy may contribute toward narrowing the gender wealth gap,” she says.
Andrew Wilson, consultant economist at Archistar, estimates a single parent earning $125,000 using the FHG would be able to borrow about $500,000 at current interest rates to purchase a home.
However, that will still leave them with few options to purchase appropriate family friendly homes in Sydney and Melbourne, where prices are booming, Dr Wilson says.
New Home Guarantee
The government has also extended and renamed a scheme where first-home buyers with a maximum income for couples of $200,000 can purchase a home with a deposit of just 5 per cent.
The price ceilings for the New Home Guarantee are $950,000 in Sydney and $850,000 in Melbourne, with 10,000 places becoming available from July 1 to those seeking to build a new home or purchase a newly built home.
Dr Wilson says the measures to assist first-home buyers are a bit “ho-hum”, given recent rocketing property prices. “They are narrowly targeted and are unlikely to significantly stem an ongoing decline in activity from first-home buyers”, Dr Wilson says.
“Increasing activity from investors and rising property prices are likely to see first-home buyer activity fall by 20 per cent next year, and that is assuming full uptake of the schemes announced in the budget”, he says.
Tax relief will be extended for another year from July 1, in the form of retention of the Low and Middle Income Tax Offset. It is worth a maximum of $1080 for individuals and $2160 for couples, with the main benefits going to those earning between $48,000 and $90,000 a year.
The budget confirmed the current $10,560 cap on the childcare subsidy will be removed.
Families with two or more children aged 5 and under will receive an increase of up to 30 percentage points in the subsidy for their second and later children up to a maximum of 95 per cent of fees paid.
Article Source: www.brisbanetimes.com.au
This is how long it takes Brisbane first-home buyers to save for a house
Brisbane first-home buyers have bucked a nationwide trend. They are now taking less time to save for a deposit, with closed borders, government grants and a softening of entry-level house prices launching locals onto the property ladder faster than a year ago.
Despite the city’s soaring property market recently pushing median house prices to record heights, new data from Domain’s First-Home Buyer Report, released on Monday, revealed it now takes the average couple four years and two months to save a 20 per cent house deposit – which is four months less than this time last year.
Brisbane was the only capital city to see savings time slashed over the 12-month period, with Sydneysiders forced to tack an extra six months onto their already painfully slow savings haul – which is now seven years and one month for the average couple.
Domain senior research analyst Nicola Powell said the data revealed just how sunny the market remains in the Queensland capital – with grants and wage growth easing the squeeze for first-home buyers alongside COVID, which had worked wonders for savvy savers.
“Brisbane bucks the trend really in terms of what we’re seeing across our other cities, and while it doesn’t have the quickest time to save, it’s seen more favourable conditions over the past year,” Dr Powell said.
“It was the only city to see a decline in time for houses while for units it remained stable … and what we’ve also seen is tax cuts and compounding interest on savings have helped speed up that time.
“I think over the past 12 months, we’ve all saved more, and for first-home buyers, it has supercharged their savings pot … the pandemic has also really unlocked an element of affordability. For those first-home buyers who can work from home, they are able to now seek different locations to reside, which opens the door to affordability.”
Stamp duty v land tax: the pros and cons explained
Housing affordability continues to be a hot topic and the often-raised suggestion of replacing stamp duty on the sale of a property with a universal land tax is back on the table again.
The idea has been around for more than a decade after former Treasury secretary Ken Henry claimed that stamp duty not only is a disincentive for people to move, but also gives state governments erratic income – their coffers overflow when the property market is booming but withers away when the market slumps.
The NSW government is dusting off the idea again by commissioning a consultation paper and inviting interested parties to provide their views until July 30.
The proposal envisages that a homebuyer could either opt to pay stamp duty on a property purchase price, or an annual land tax that would be based on a property land value that would then be attached to it forever. In other words, once a purchaser opted for the annual land tax option in lieu of stamp duty, there would be no going back.
In the event of the scheme proving popular, the paper envisages a price threshold based on the value of the property. If that was the case, a buyer of a $5 million property could still be liable for stamp duty on its purchase and could not opt to pay land tax instead.
State governments receive more than $20 billion a year from stamp duty, so any introduction of a new scheme would need to be phased in.
The proposal floats the possibility of the amount of stamp duty forgone being capped at, say, $2 billion a year in the early years, with the cap changing over time as the number of people opting out of stamp duty increases.
Proponents of the scheme claim that the property market would boom because buyers could use the extra money now required for stamp duty to increase their home deposits and qualify for bigger mortgages. However, this begs the question, do we really want to encourage homebuyers to take out even bigger loans? After all, interest rates are at rock bottom and must rise in the future.
If you think mortgage stress is bad now, imagine what a 2 percentage point rise in mortgage interest rates would do.
The biggest problem with a tax based on land values is that, in many states, it is common practice to leave the rate of land tax unindexed, which means that each time a property increases in value, the land tax bill increases, too.
A homeowner who chose the land tax option would most likely be faced with an increasing land tax burden as the years passed. This could be particularly hard on retirees, who could see their home costs increase while their capital decreases.
Another major flaw in the proposal is that it would likely provide a “free kick” for property speculators. It is generally accepted that speculators competing with regular homebuyers has been a major reason for property prices soaring to record highs.
In NSW, a person who buys a property today for $800,000 would pay stamp duty of $31,335, irrespective of whether or not it is their primary residence. This large upfront cost is a major disincentive for speculators who want to buy property now and quickly flip it.
However, speculators may have a field day if they could choose an annual land tax bill instead of stamp duty. If they held the property for only a short time, there may be no land tax at all payable.
There is a further complication with the land tax proposal.
Investors already pay land tax on rental properties and this cost is usually passed on to their tenants.
It would be manifestly unfair if stamp duty – which is a capital cost, not a deduction – was waived on property purchases for investors, while continuing to allow them to claim a tax deduction for the land tax, which had already indirectly been passed on to tenants.
The land tax proposal is merely in the consultation stage. Let’s hope there are further deep discussions of all the pros and cons to avoid any potential property market disasters.
Article Source: www.brisbanetimes.com.au
Return of property investors raises questions for regulators
It is becoming clearer that the window for large numbers of first home-buyers to scramble into the property market is fast closing, with investors and speculators chasing big capital gains returning.
With the house price boom showing few signs of cooling, this baton-pass should ensure an ongoing and lively debate about whether it is time for regulators to place restrictions on mortgage lending.
Earlier this year, first-home buyers were flooding into the property market in numbers not seen since 2009, attracted by generous taxpayer incentives and record-low interest rates. Sadly, the first-home-buyer party appears to have been short-lived. New lending to this group has fallen for three months in a row, no doubt partly in response to the explosion in prices.
Meanwhile, investors are flooding back into the market, with their share of new lending rising from 23 per cent to 26 per cent. New investor commitments in April were at their highest level since 2017, when we were in another property boom.
Importantly, investors’ share of the market is still well below the sky-high 46 per cent of new lending reached in 2015, and below its long-term average of about 35 per cent. However, the harsh financial realities of this property market suggests that this trend still has a lot further to run.
For one, CoreLogic analyst Tim Lawless says first-home buyers tend to be the most sensitive to rising prices, especially when it comes to scraping together enough cash for a deposit.
Investors, on the other hand, typically have better access to funding because they can borrow against their owner-occupied residence, or other property investments. They also often have higher incomes, and Lawless says they’ll probably become more active in the market chasing capital gains.
So far, banks say there are only early signs that investors’ interest is stirring, and owner-occupiers are still overwhelmingly driving the market. That is one reason regulators have pushed back against imposing credit restrictions so far. But with the Reserve Bank of Australia (RBA) saying it expects to keep official interest rates at just 0.1 per cent until at least 2024, more house price growth looks likely.
If there is a further significant rebound in investor lending accompanied by related property price surges, it could force regulators to think more carefully about introducing housing credit curbs.
Why? The RBA has made it clear that an investor-driven market has distinct risks.
In 2015, the central bank said that when house prices were being fuelled by “speculative demand” from investors chasing big capital gains, it tends to “amplify” the run-up in prices, while potentially raising the risk of bigger property price falls in the future.
To be clear, we are not in a 2015-style investor housing boom today. However, interest rates are much lower and asset prices everywhere are rising, suggesting these risks are as relevant as ever.
Politicians might also find it more challenging to allow the market to continue its red-hot run if investors start playing a bigger role, while first-home buyers dwindle.
So far, the financial regulators have argued they are not responsible for house prices and will only act if the banks erode their lending standards. That does not appear to be happening, suggesting credit curbs are not imminent.
Even so, the growing signs of investors coming back to the market, as first home buyers head for the exits, is an important shift the authorities will be watching closely.
Article Source: www.brisbanetimes.com.au
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