Insight

01.06.21  Tax & Finance

 

How Will Property Benefit From Federal Budget 2021?

This year’s federal budget aims to continue stimulating Australia’s economic recovery from the pandemic and there’s some potential good news in it for certain buyers and sellers.

It’s always interesting to see what news the federal budget holds and this year has been no exception. The federal government’s 2021-2022 Budget had a big focus on women, infrastructure projects, building apprenticeships, and on sectors devastated by the pandemic, such as tourism, airlines and the creative arts.

But there was also some good news for property owners and those still wanting to get on the property ladder. The Budget specifically highlighted the “economic and social benefits” of owning a home and announced schemes to help three groups of buyers: downsizers, single parents and first homeowners.

We look at what initiatives the federal government has planned and how they will impact buyers and sellers in Sydney’s East.

Downsizers

Downsizers are a huge force in our local property market and it can be a difficult move to make, both emotionally and financially. So we were glad to hear about some increased incentives for people to leave the family home and, well, downsize.

The Budget announced an expansion of the “downsizer contribution”, which allows Australians nearing retirement age to make a post-tax contribution of up to $300,000 each when they sell their family home. This scheme had already been taken up by 22,000 people in its old form, but now the minimum age will be lowered from 65 to 60, allowing more downsizers to benefit.

Single-parent families

It’s hard enough to buy a home in Sydney, but if you’re a single parent relying on just one income and trying to save a deposit, it’s even harder still.

The Federal Government is offering a helping hand through a brand new scheme called the Family Home Guarantee. As part of this scheme, it will guarantee up to 18% of the cost of a single parent’s property, so they may be able to purchase a home with as little as a two per cent deposit, without incurring lenders mortgage insurance (LMI) costs.

It extends to all single parents with dependents, who meet the income cap of $125,000, including those who’ve previously owned property. It also applies to both new and existing homes, but the home’s value is capped at $700,000 for Sydney.

All up, 10,000 places will be made available under the scheme over the next four years.

First Home Buyers

First home buyers are already eligible for four different schemes.

Two are run by the State Government: the First Home Owner Grant, which provides a one-off payment, and the First Home Buyers Assistance Scheme, which provides for stamp duty exemptions or concessions.

But there are also two existing federal schemes aimed at helping Australians onto the property ladder for the first time. The Budget announced expansions to both of these.

The First Home Loan Deposit Scheme (FHLDS) is set to continue, with another 10,000 places opened up from July 2021.

This scheme sees the Commonwealth government guarantee up to 15% of a first home buyer’s home loan, allowing them to buy a home with as little as a five per cent deposit and no need for LMI. Income caps apply of $125,000, or $200,000 for couples and the property must be worth less than $700,000 if it’s in the Sydney metropolitan area.

The Commonwealth government has also increased the withdrawal cap to $50,000 for the First Home Super Saver Scheme (FHSS). This allows first home buyers to make extra contributions to their super, up to $50,000 at a lower tax rate of 15%, which they can then withdraw and put towards a home deposit. The current cap is $30,000.

What your money could buy

The good news is that with property prices at all-time highs and still rising, downsizers won’t have any trouble putting away $300,000 if they decide to sell the family home.

However, it’s a different story for first home buyers and single parents trying to find a property that fits the eligibility requirements.

It’s difficult to find a property under the price caps for the First Home Loan Deposit Scheme or the Family Home Guarantee Scheme in Sydney’s eastern suburbs, and you certainly wouldn’t be able to afford a house.

There are, however, plenty of one-bedroom units available in select suburbs.

If you do qualify for the schemes here’s a taste of what you may be able to afford for close to the $700,000 caps in Sydney’s eastern suburbs.*

  • One-bedroom unit in Waverley: $606,000
  • One-bedroom unit in Kensington: $645,000
  • One-bedroom unit in Centennial Park: $657,750
  • One-bedroom unit in Randwick: $685,000
  • One-bedroom unit in Potts Point: $685,000
  • One-bedroom unit in Bellevue Hill: $690,000
  • One-bedroom unit in Paddington: $705,000
  • One-bedroom unit in Surry Hills: $725,000
  • One-bedroom unit in Bondi Junction: $727,000
  • One-bedroom unit in Rose Bay: $733,000
  • Two-bedroom unit in Kingsford: $790,000

*Median prices for Sydney’s East according to realestate.com.au data from May 2021.

Want more?

If you’re interested in buying or selling in our local area, get in touch.

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