There is positive news for many would-be property owners in Federal Budget 2021, but especially for single-parent families, downsizers and first home buyers.
We look at what the federal government has pledged, as well as how its promises are likely to impact the market here in Sydney’s inner city and inner west.
To generate more activity in the market and open up more housing supply, the government is keen to encourage older Australians to downsize. As an incentive towards this, it’s now allowing anyone over the age of 60 to contribute $300,000 from the sale of their home directly into their superannuation. While this scheme had existed previously, it was restricted to people over the age of 65 or retirement age.
First Home Loan Deposit Scheme extended
One of the most important measures in the federal budget is that the First Home Loan Deposit Scheme (FHLDS) is set to continue, with another 10,000 places opened up from July 2021.
Under the terms of the FHLDS, the Commonwealth government guarantees up to 15% of a first home buyer’s home loan. This means they can buy a home with as little as 5% deposit without having to pay expensive lenders mortgage insurance (LMI).
The scheme does come with some restrictions. Applicants must have an income below $125,000, or $200,000 if they’re applying as a couple. Also, the property must be worth less than $700,000 if it’s in the Sydney metropolitan area.
While there aren’t too many properties around here that match those criteria, it’s still potentially great news for some first home buyers. As many will tell you, the most difficult part of getting into the property market isn’t usually getting a loan, it’s saving a deposit to take out a loan in the first place.
For example, if you were to buy a $700,000 home with a 20% deposit to avoid LMI, you’d need to have saved $140,000 - and that’s not taking into account any stamp duty and other upfront costs.
First home buyers can tap more super
In another move to help first home buyers onto the property ladder, the Commonwealth government has also extended and enhanced its First Home Super Saver Scheme (FHSS). This lets first homeowners make extra contributions to their super, which they can then withdraw and put towards a home deposit.
Originally introduced in 2017, the government used the federal budget to announce the scheme would continue and that from 1 July 2021, first home buyers would be able to withdraw up to $50,000. The current cap is $30,000.
It’s important to note that first home buyers can’t access their ordinary super contributions under the FHSS. They’re limited to withdrawing only contributions they make directly into the scheme plus any earnings derived from them. The benefit is that any contributions receive the favourable tax rate afforded to super (15%) and also have the chance to earn a far higher yield than if left in a bank account.
Single parent families to receive an extra helping hand
Anyone who’s raised children single-handedly will be able to tell you how much more difficult finances become. So it’s good news that the government has announced a new scheme that will guarantee up to 18% of the cost of a single parent’s property.
The Family Home Guarantee Scheme works in a similar way to the FHDS, with the same limits on income and property prices. However, it extends to all home buyers, including those who have owned property before.
All up, 10,000 places will be made available under the scheme over the next four years.
What your money buys...
If you do qualify for the First Home Loan Deposit Scheme or the Family Home Guarantee Scheme, here’s a taste of what you may be able to afford for close to the $700,000 cap in Sydney’s inner city and inner West.
- C10/240 Wyndham Street, Alexandria. This one-bedroom apartment in an award-winning warehouse conversion sold for $645,000.
- 18/11-17 Wyndham Street, Alexandria. This oversized one-bedroom apartment at the rear of a quiet block is just a five-minute stroll from Redfern station. It sold for $714,000.
- 43/194-218 Lawrence Street, Alexandria. This one-bedroom townhouse is a private sanctuary in the heart of Alexandria. It sold for $781,000.
- 1202/221 Sydney Park Road. A designer one-bedroom apartment that’s part of the popular ‘Zenix’ building, this large, light-filled residence sold for $730,000.
If you’re interested in buying or selling in our local area, get in touch.