Labor win may be a boost to property affordability
Property buyers and investors looking at the sub $1 million price range may get the boost now that the Australian Labor Party (ALP) is in power.
Domenic Nesci, Co-founder at Wealthi said, “We can see demand (for properties) on the lower end of the market as more people go for more affordability.”
Under its policy announcement a few days before the election, the ALP launched its ‘Help to Buy’ scheme aimed at helping property buyers.
The scheme will:
· Be available for up to 10,000 households/applicants per year
· The Labor government would pay for up to 40 per cent on a new home and 30 per cent on an existing home
· It will be available for couples earning up to $120,000 and singles earning up to $90,000.
· Home buyers will only be required to have a deposit of 2 per cent (or more) can qualify for a standard home loan with a participating lender
· Property buyers can increase their equity on a property by buying back from the government
“We see this (Help to Buy scheme) as a more targeted policy toward the lower end of the market. Those who are looking at the $800,000 – 950,000 price range may benefit from this initiative,” Nesci said.
However, it is still too early to tell the full impact of a Labor government on the property market.
“There are still a lot of details to be ironed out. However, we can only hope that the government will deliver the much-needed infrastructure such as transport hubs to support new developments,” Nesci added.
Nesci noted that a similar scheme was successfully implemented in the UK.
“Whilst I was living in London, they had a similar program that at a glance is an affordable way to enter the property market,” he said.
Considering the anticipated interest rate rises, Nesci said the Labor initiative can be a big push towards housing affordability.
From Wealthi’s point of view, here are some things to keep in mind when considering the Labor government’s ‘Help to Buy’ initiative.
· The scheme is open to new and established property
· The UK scheme is only for brand new property
· The UK scheme says that the equity component must start getting repaid after 5 years
One of the criticisms during the campaign against the scheme was that it was too ambiguous, if including established property (who funds renovations and upside from adding value etc). We suspect that as it gets closer to becoming policy, they will tidy it up to look like the UK.
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