The Federal Budget And What That Means For Home Owners
Direct first-home buyer assistance and imminent changes to responsible lending were the main housing policies in the federal budget.
But how did it affect other players in the housing market?
The biggest announcement was reserved for buyers hoping to climb onto the property ladder for the first time, with an extension to the First Home Loan Deposit Scheme (FHLDS).
Announced prior to the budget, 10,000 additional places were added to the scheme, after 20,000 places across two previous tranches were nearly exhausted.
But some significant changes were revealed.
Firstly, price caps for capital cities and regional areas were raised to boost the number of eligible homes and apartments.
And the extended scheme was restricted to under-construction or newly-built homes.
The FHLDS allows buyers to purchase homes with a 5 per cent deposit, with the government guaranteeing up to 15 per cent of the mortgage to ensure buyers do not pay thousands in lenders mortgage insurance.
However, research found, the trade-off in added interest payments could raise the overall cost of a 30-year loan by six figures.
Amid a wave of mortgage deferrals and falling house prices, home owners would have been forgiven for expecting more direct support to flow from government.
But CoreLogic head of research Eliza Owen told the Reserve Bank and regulator APRA had pulled together to support struggling home owners during “the biggest economic shock since the 1930s”.
“We saw changes to the treatment of loans to allow for deferrals which was then extended to March, we saw the implementation of the Term Funding Facility and a reduced cash rate that have both helped make mortgages cheaper,” Ms Owen said.
Ms Owen also noted extra relief could come from state governments in their budget announcements, particularly as most state-based relief had been geared towards first-home buyers and the construction sector.
With workers in renter-heavy industries such as hospitality and retail bearing the brunt of lockdowns, rental incomes have been slashed as affected renters seek affordability.
And with JobSeeker and JobKeeper rates recently reduced, it could spell more dire news for investors wanting to maintain their rental income.
However, Ms Owen said the “indirect impacts” of the newly-announced JobMaker program – which provides businesses that hire 16-to-35-year-olds on welfare payments a credit of up to $200 a week – could flow on to the rental market.
“The quicker we can reabsorb jobs for young people, the more upward pressure that has on rents,” Ms Owen said.
One notable budget omission that drew the ire of economists, housing academics, welfare advocates and property industry leaders was an absence of direct spending on social housing.
Despite the nation’s leading economists ranking it first among all other stimulus measures on their budget wish list, Treasurer Josh Frydenberg offered little.
Mr Frydenberg announced a $1 billion boost to the National Housing Finance and Investment Commission for social housing bonds, and $150 million for the Indigenous Home Ownership Program.
Labor announced in its budget reply that it would invest $500 million to accelerate repairs on existing social housing if in government.
Up-sizers and down-sizers
Up-sizers and down-sizers would likely see the most benefit from proposed changes to responsible lending laws flagged in budget documents.
Treasury’s budget overview said removing responsible lending obligations for most products – including home loans – would “streamline” the credit application process and “allow eligible borrowers to obtain credit faster”.
In essence, it would encourage up-sizers and down-sizers to sell their property for a higher price, and settle on a new purchase more quickly.
“Ultimately, anything that makes credit easier to access generally has an inflationary impact on the market as it boosts demand,” Ms Owen said.
“For upsizers who are moving from lower-value segments of the property market to a higher value, they may find their selling price is not as impacted, but may buy into a market where there are greater discounts.”
Ms Owen said regional markets, which have been resilient through the pandemic, would continue to receive boosts in buyer interest as a result of the $350 million earmarked to support regional tourism, concessional loans to farmers and access for exporters to global supply chains.
However, the lack of focus on fossil fuel alternatives and climate action could have long-term consequences for rural areas, she said.
“If we look at the extremities of recent bushfires or storms in Far North Queensland, by not addressing climate change, we’re potentially exposing those regional dwelling markets to more volatility in the long run,” Ms Owen said.
“Areas hit by cyclones, for instance, saw a long-term dent where those markets only just started to recover before the onset of COVID.”
Source: News Daily