The Federal Election is finally over. Despite how everyone is feeling about the outcome, a collective sigh of relief can be heard throughout Australia as we now move on with life. Regardless of all the pre-election promises made, only time will tell the changes our elected government will make (or not). However, those connected to the property market have waited with bated breath to find out which direction prices will go.
In his recent election campaign, Scott Morrison felt strongly “that all Australians should be able to aspire to own their own home”. However, the deposit that first home buyers need to raise to get on the property ladder is much higher than previous generations. This has created a barrier and prevented many from owning a home. The Morrison Government proposed to address the high deposit barrier-to-entry in the property market by reducing the deposit from the current average 20% rate to as low as 5%. In a recent campaign speech, Scott Morrison was quick to point out that this is not “free money” and as per the current system, due diligence will still be undertaken by financial institutions to ensure that borrowers can service their loan repayments.
Morrison’s National Housing, Finance and Investment Corporation (established by Morrison when he was Treasurer) proposes to cover the “gap” between the current 20% deposit and lower 5% rate by “guaranteeing” borrowers. Morrison also explains, “this scheme would give preference to working with the smaller banks and non-bank lenders to boost competition”. This scheme will be available for first home buyers with an income of up to $125,000 or a couple with $200,000 where they are both first home buyers. The guarantee would cease when the homeowners refinance in the future - ideally after the equity of their home increased (which Morrison is confident will happen under a Liberal National Government).
The Morrison Government recognise the hard work and sacrifices that Mum and Dad investors make in order to build their nest egg. Their hard work and investment also contributes to more rental accommodation options for Australians. Investing in the housing market, keeping the economy strong by encouraging job growth, as well as ensuring that there are no changes to property tax are a couple of ways the Morrison Government have promised to support the property market. In short, this government place value on people establishing their own economic security, and they see a large part of this can be achieved through owning their own home, especially by the time they retire. If the elected Government stick to their promises, the reduced deposit scheme is a life-line for first time investors, and Mum and Dad investors stand to benefit from no “new taxes on housing. Guaranteed.”
The 2019 Federal Election At a Glance
In summary, this is how the election result will impact property:
The current required deposit of 20% will be reduced to as low as 5% for first home buyers.
This reduction will be funded by the Morrison Government’s National Housing, Finance and Investment Corporation.
First home buyers with an income of up to $125,000 or a couple with $200,000 will be eligible for this new scheme.
Borrowers will still need to meet loan serviceability requirements, but smaller banks and non-bank lenders will be given preference under the new scheme to boost lending competition.
Investors will benefit with the promise of no new property taxes.
These are very big calls that will hopefully inject some confidence into property. In the meantime, the RBA’s recent interest rate reduction to 1.25% (a record low) will hopefully stimulate our economy further. We can only “wait and see” what impact our newly elected Government’s promise of “Building our economy. Securing our future” has on the property market.