Labor has reactivated its Help to Buy scheme, which means you can move into a “home” with just a 2 per cent deposit.
It is what’s known as a “shared equity scheme” and was part of the 2022 federal government election commitment.
It means you can co-buy a home, with the government offering a helping hand.
The scheme will give people an “equity contribution” of up to 40 per cent of the cost of a new home, or 30 per cent for existing homes.
It can be a house, unit or townhouse.
The buyer won’t need to pay rent on the stake owned by the government.
But you will have to pay a component of any capital gain back to the government.
The capital gains will be calculated in reference to the size of the government’s equity share in the property.
For example, if the government holds a 30 per cent share in the property, then it would be entitled to 30 per cent of the proceeds of sale, which includes 30 per cent of any capital gains earned.
Seems like an interesting idea, though I get the feeling this is just going to keep inflating property prices right? It’s not doing anything to address the increased cost of housing, just helping more people enter the overpriced market.
Traditionally and ideally, Homebuyers go to the bank with 20% deposit. With 4 bedroom homes costing $1 Million these days, that’s $200k. People don’t have $200k, that’s a problem to be sure.
The proposed solution is to help people who have saved $20k to get into the market. I like that the government is trying to help people get into the market.
I would prefer solutions that lead to houses being cheaper. This solution won’t do that. In fact, by making it easier to buy a house at present prices, the government is increasing demand - and therefore house prices. What if instead of increasing demand, the government increased supply? I’m no economist, but if the supply of a product raises to meet demand, prices for that product fall.
I wish it was just $200k in your example, the fees and taxes add 20 to 50k depending on your situation
You’re going to need closer to $300,000 in hand for the $1m house to avoid LMI, don’t ask how I know… 😞