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Will this Budget actually help first home buyers?

Bungalow style houses with young people moving into a new home
The Federal Budget unveiled a range of new measures to help first home buyers (Source: Getty)

Treasurer Josh Frydenberg unveiled a number of initiatives targeting the soaring property market in the 2021 Federal Budget but some think these measures will only serve to push the market higher.

Here are four key measures and a range of expert opinions on whether or not they will help Aussies achieve their dream of buying a new home.

Super Saver increase

Will this help first home buyers? Yes and no

The First Home Buyer Super Saver scheme was expanded last night and increased the amount first home buyers can remove from their super from $30,000 to $50,000.

The way the scheme works is by voluntarily putting up to $50,000 into your superannuation fund and then withdrawing this amount (plus earnings, less tax) to buy your first home.

It does not allow someone to take money from their existing super, only the excess they contribute.

For the scheme

Head of research at Corelogic Eliza Owen said increasing the amount that can be saved and removed makes sense in an environment where keeping your money in an ordinary savings account probably isn’t packing on the interest.

“Increasing the cap to $50,000 seems reasonable, particularly in an environment of low savings deposit rates, and rising asset values,” she said.

Against the scheme

Archistar chief economist Andrew Wilson said it’s unlikely that the reforms made to this scheme are going to do much for first home buyers, or at least not this financial year.

"The First Home Buyer Super Saver Scheme will now allow an increase in member contributions from $30,000 to $50,000 specifically nominated for the purchase of a new home and with annual contribution caps,” Wilson said.

“This is however unlikely to have a significant impact on first home buyer numbers over the shorter-term with the changes to come into effect from July 2022.”

CBA chief executive Matt Comyn had previously acknowledged the difficulty involved in saving for a home because rent prices are also soaring.

So, just because the limit of what you’re able to save within your super has increased doesn't mean it’s going to be easier to put that money aside.

"Skyrocketing house prices are bad news for first home buyers who struggle to save the required deposit to keep up with a hot market – particularly with income growth at record low levels,” Wilson said.

More on Federal Budget 2021:

First Home Loan Deposit scheme extended

Will this help first home buyers? Yes but it’s too little, too late

Initially launched in last year's Budget, the First Home Loan Deposit scheme has been extended to another 10,000 Aussies looking to enter the market.

The scheme allows Aussies looking to build or purchase a new home to do so with a 5 per cent with the Government guaranteeing the remainder.

Usually first home buyers with less than a 20 per cent deposit need to pay lenders mortgage insurance.

For the scheme

Owen said the first round of this scheme last year was extremely popular, with all 10,000 spaces filled within two months.

“This signifies just how much of a barrier the deposit hurdle is to accessing housing,” she said.

“The benefits of such a policy are advocated to be two-fold, creating seemingly easier access to home ownership, as well as generating economic activity in the construction sector.”

Against the scheme

Wilson said while the scheme will help some first home buyers, the reality is that it’s too little too late.

“The price ceilings for this scheme are $950,000 in Sydney, $850,000 in Melbourne and $650,000 in Brisbane. Again, restricted to 10,000 places,” Wilson said.

"Although this scheme, building on its previous success, will provide more opportunities for first home buyers, the current boom in new house construction is set to lead to supply constraints and higher building costs, and clearly favours those content with outer-suburban fringe living.”

The current median asking price for a new home in Sydney is $859,995, in Melbourne $556,000 and in Brisbane $491,000.

  • Watch: Treasurer Josh Frydenberg unveils tax cuts in 2021 Federal Budget

Family Home Guarantee

Will this help first home buyers? Yes but it poses problems

Aimed at single parents, the launch of the Family Home guarantee was announced before the Budget release.

The scheme allows up to 10,000 single parents with a maximum annual income of $125,000 to purchase a home with a minimum deposit of 2 per cent.

Much like the New Home Loan Guarantee, the Government will guarantee the remaining 18 per cent to the lender.

For the scheme

Unsurprisingly, the Big Banks all welcomed the scheme because as lenders it also benefits them, but they also acknowledged how much it can help struggling single parents.

“This announcement will come as a welcome relief for hard working single parents, particularly those working in essential services such as education, health care and public safety, looking to buy their first home or re-enter the property market," Comyn said.

NAB group executive personal banking Rachel Slade said the bank was also a strong supporter of the scheme.

“We’re excited by the new initiative for single parents, recognising that buying a home is often a major challenge for Australians on a single income," she said.

"We expect the Family Home Guarantee will provide hope and build confidence for single parents to enter, or in some cases re-enter, the property market."

Against the scheme

Ownes said while single parent households are predominantly headed by women and this scheme will help work towards narrowing the wealth gap, there are issues with it.

“Low deposits mean more debt. More debt means more interest needs to be paid over the life of the loan,” Owned said.

However, she said taking on more debt initially may be worthwhile if the single parent were to otherwise be sending tens of thousands on rent each year.

Wilson said while the scheme has the right idea, the money provided under it is not enough to help single parents buy a home.

"Applicants with the maximum income profile will be able to borrow around $500,000 at current interest rates which will nonetheless leave few options to purchase appropriate family-friendly homes - particularly in Sydney and Melbourne that generate the majority of first home buyers nationally,” he said.

Lowering the age limit for the downsizer scheme

Will this help first home buyers? Not really

In addition to the policies targeting young first home buyers, the Budget also reduced the age limit that allows extra super contributions to those that sell a family home which has been owned for at least 10 years.

The age eligibility for the scheme has now been lowered from 65 to 60 years old.

Frydenberg said the move will help free up some of the housing market and make it easier for young people to gain access and will help older Aussies be better prepared for retirement.

For the scheme

Owen said the measure may help free up more established housing by incentivising the older generation to sell sooner.

“This is particularly important in the current climate, where housing demand remains high against a low supply of available properties,” Owen said.

Against the scheme

Owen said despite the the above, the measure isn’t coming into effect until July 2022, so will have a reduced impact.

“This means motivated downsizers aged 60 to 64 may wait for the scheme to come into effect before selling, and any impact of increased listings as a result would only impact the housing market then,” she said.

“It is also worth noting that in the almost three years since the scheme was implemented, only around 22,000 individuals have accessed it, so this may not add materially to supply.”

Wilson agreed that with the schemes so far limited success it’s unlikely that lowering the age is going to achieve anything.

"The reduced age eligibility will only exacerbate this issue, with the clear shortage of reasonably affordable, medium-density and larger higher-density dwellings in established middle and inner suburbs,” he said.

“The availability of appropriate suburban downsizer accommodation likely takes priority over financial incentives, particularly for a younger demographic.”

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