11.02.2022 Local News

Budget Impacts For Downsizers And First Home Buyers

Budget Impacts For Downsizers And First Home Buyers

First home buyers and downsizers could be two of the main winners from the recent budget.

Last week’s federal budget contained some announcements that could directly benefit some home buyers, most notably downsizers and those entering the market for the first time. But the indirect effects could be broader, potentially leading to more transactions and freeing up more stock.

We explore who benefits from the recent budget when it comes to property and what it’s likely to mean for the local real estate market here in Sydney’s Eastern Suburbs.

More downsizers to benefit

From our point of view, one of the key announcements was the widening of the federal government’s downsizer contribution scheme. This scheme allows downsizers to make a contribution of up to $300,000 per person into their super from the sale of the family home. That means a couple could contribute up to $600,000.

While the scheme has been around for some time, it initially applied only to people over 65. Then at the start of this financial year, the age came down to 60.

The recent Budget reduced the age limit even further to just 55.

We think this is great news. Downsizers are one of the most important demographics in the property market in many parts of Sydney’s Eastern Suburbs. Expanding this scheme will give some people a real incentive to sell and move into a home that suits them better over the long term.

Others benefit too

There’s also the bonus that when downsizers benefit, upsizers could potentially benefit too.

As we’ve previously reported, for some time lack of stock – particularly in family homes – has been one of the real factors holding back our property market. When fewer homes are listed, it denies people the opportunity to move up the property ladder. If more family homes come onto the market, this should help people who want to upgrade. This, in turn, should benefit those who want to get onto the property ladder for the first time.

Unfortunately, the only factor that needs to be added to this equation is the appropriate properties for downsizers to move into. After all, many expect more space, privacy and luxury than a lot of traditional apartments offer.

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We expect this to change in the near future, with more prestige developments aimed specifically at meeting the growing expectations of downsizers.

The Budget and housing affordability

The biggest real estate-related announcement to come out of the Budget was a new National Housing Accord. Under this, the government said it would target a lack of supply in the real estate market by encouraging the private sector to build one million new homes by 2029.

In reality, this is not much different from the number of homes built over the previous five years. However, as we seem to be entering an environment of higher construction cost and higher interest rates, it is still significant. Also potentially important is the government’s announcement that it will contribute $350 million to build 10,000 affordable homes. It will also encourage super funds and institutional investors to own social and affordable residential housing, pledging to cover any shortfall between subsidised rents and market rents.

Affordable housing and the Eastern Suburbs

While the details of the government’s scheme is yet to be finalised, affordable housing is something that has been lacking in Sydney’s Eastern Suburbs for some time. This can prevent essential workers – such as nurses, teachers and others – from living near their work. So we think we should welcome any addition of affordable housing.

The Budget also confirmed that the federal government would increase the availability of the Home Guarantee Scheme, under which it guarantees up to 15% of a first home buyer’s mortgage. At the same time, recent price falls mean that more properties may come under the $900,000 cap that applies to the scheme.

As we recently noted, despite rising interest rates and gloomy headlines, this could potentially be the best time to buy into the Sydney property market that we’ve experienced in some time. So we’d encourage people who are renting to look seriously at whether they can now afford to buy.

Want more?

If you’d like to find out more about property in Sydney’s Eastern suburbs, get in touch with our team today.