Australia’s housing market is looking to be reignited thanks to a combination of factors including a stimulus package focused on helping first home buyers, tax cuts, lower interest rates and increased infrastructure spending.
A lot has changed in just a couple of weeks!
So, with the 2019 Federal Election behind us and the Coalition officially securing another three-year term, we’ve wrapped up some of the key policy changes which could influence a shakup in the Australian property market.
First home buyers scheme
- Prime Minister Scott Morrison has promised to help first-home buyers enter the property market with the First Home Loan Deposit Scheme, a $500m policy that will help 10,000 beneficiaries annually by reducing the initial deposit needed to receive a home loan.
- Single first-home buyers earning up to $125,000 annually or couples earning $200,000 combined are eligible for the benefit.
- Buyers will be able to trim their deposit-saving time, with the table below showing the difference between 5% and 20% deposit requirements in each capital city. (Median dwelling values are based on CoreLogic’s April 2019 median housing data).
|Capital City||Median |
|20% deposit||5% deposit||Difference|
- Certain analysts are critical of the program. They urge prospective homeowners to consider if the deposit savings stack up with the interest payments down the line, especially in the context of house and rent price movements.
- In the short-term, as promised in the Coalition’s election campaign, there will be a reduction in personal income tax* for all individuals earning up to $126,000 per year.
- The plan would give a dual income household an extra $2,160 a year.
- Up to $1,080 – or $20 per week – for workers earning up to $90,000.
- 94% of workers will pay no more than 30c tax for every dollar they earn from 2025.
*Note: due to the electoral process, it is not guaranteed the income tax cuts will be implemented before June 30th. Watch this space!
Minimum interest rate serviceability buffer removed
- APRA announced they would scrap mortgage serviceability conditions that were introduced in 2014 requiring lenders to assess a borrower’s ability to repay a loan on either a minimum mortgage rate of 7% or a buffer of at least 2% above the actual loan interest rate – whichever was higher.
- By scrapping the 7% floor rate but increasing the mortgage buffer from 2% to 2.5%, home buyers in the current market, with mortgage rates being offered at 3.5%, will have greater borrowing capacity.
- This move has come in anticipation of a possible interest rate cut from RBA, with Westpac’s senior economist, Bill Evans telling the Guardian that there may be 3 rate cuts ahead of us this year.
- 10-year infrastructure package increase from $75 bill to $100 bill
- $3 bill boost to the Urban Congestion Fund.
- $2 bill towards Melbourne to Geelong fast rail project
- $100 mill for regional airports
- $2.2 bill for road safety.
Where is Australia currently sitting in the property cycle? Check out timing the market with the property clock.
“First home-buyers are in the box seat”
In our latest property meeting, BrickX’s expert team discussed what these results would mean for the property market. A few key points discussed by Nerida Consibee, Chief Economist at REA and part of our BrickX’s Advisors Panel:
- Post-election, sentiment seems to have shifted – people are feeling far more confident about the market compared to even one week ago.
- We’ve hit bottom in Sydney; in April, prices flatlined.
- Melbourne still saw a decline in April but rental and buyer demand has always been better in Melbourne than Sydney.
- Great buying conditions for first home-buyers, with fewer investors in the market and consequently less competition.
Many indicators that prices will stabilise further and potentially grow – in 6-12 months time we’ll see price growth in many parts of Australia
For the full conversation, watch the video below: