The 2020-21 Federal Budget was finally revealed after a six-month delay as Australia navigates the impact of the economic fallout caused by COVID-19. As Australia enters its first recession in 29 years, the 2020-21 Federal Budget presents an opportunity to stimulate economic growth and boost jobs in various sectors. Changes to the federal budget have led to an expected budget deficit of $213 billion.
However, with the 2020 budget shaped by the COVID-19 pandemic, some sectors have significantly more to gain. There is some positive news for those looking to move into the property market — especially if you are a first home buyer.
We’ve compiled a rundown of everything that was announced in the Budget and how it will influence key segments of the property market.
For property buyers and investors, relaxed lending laws and the government’s income tax cuts will free up credit, improve people’s borrowing power, help mortgage holders meet existing repayment arrangements, and provide those with deposit savings with additional funds. It will also encourage those looking to upgrade or buy an additional property with more borrowing capacity.
There will be an increased incentive for new home builds due to the HomeBuilder Scheme that could impact current home prices. However, it’s also worth noting that pricing for newly built homes may also increase up to the threshold cut-off for first home loan grants.
Construction loans have also increased, surpassing the levels pre-COVID. A boost in infrastructure spending on roadworks is expected to positively impact nearby housing by increasing accessibility to surrounding areas.
The Government is bringing forward its second stage of tax cuts, which means millions of Australians will have more money in the bank, potentially from the end of October. The government’s Jobmaker program will also go a long way in improving the rental market and further reducing the possibility of forced home sales from those who could no longer afford to continue meeting repayments.
The government’s additional support to first home buyers can help them achieve their property and financial goals this year.
The First Home Loan Deposit Scheme (FHLDS), which was launched in January 2020, will continue to encourage home purchases within price restrictions based on location, without paying Lender’s Mortgage Insurance (LMI).
The FHLDS provides a guarantee to eligible first home buyers on low and middle incomes so that they can buy a home with as little as a 5 percent deposit LMI Free.
With support for the third allotment of 10,000 first home loan guarantees, eligible borrowers can use the guarantee with other government programs like the First Home Super Saver Scheme and state and territory First Home Owner Grants. Price caps for the scheme have been lifted, which means Sydney buyers can now purchase a newly built home for $950,000 with a deposit of only $47,500. The previous limit was $700,000 for new builds and purchases off the plan.
Given that the FHLDS has already been in place since early this year, all 20,000 places have been filled. All 5,000 non-major lender quota places from the first allotment were filled within the first three months. The government is in discussion with banks to add 10,000 places for the 2020-21 financial year.
Treasurer Josh Frydenberg says the additional guarantees will be accessible until 30 June 2021 and in conjunction with the First Home Loan Deposit Scheme, HomeBuilder, and First Home Super Saver Scheme, homebuyers are set to get more Government support to achieve their home property goals amidst the pandemic.
In terms of Infrastructure, the HomeBuilder scheme continues to be in place, promoting land packages and encouraging more people to buy or renovate property.
Construction also continues to be a winner with practical measures added to stimulate building across the country. This is expected to create more jobs and improve cash flow. The $688 million HomeBuilder scheme will help people looking to build new homes or renovate their existing property.
If you’re thinking about getting a home loan throughout this time, it pays to have an experienced mortgage advisor like Shore Financial who can help you be more strategic when it comes to your home loans.
Businesses with a turnover of up to $5 billion will now be able to write off the full value of any eligible asset they purchase. This is good news for new businesses looking to start up as they can now write off any purchases for the forthcoming year and carry forward losses to reduce tax in future years. Cash flow generated from business tax cuts will assist business owners and investors as well, who may be looking to purchase commercial real estate for their business or perhaps simply a property of their own.
With the new guidelines, the Guardian reports that businesses will be allowed to carry back their losses from the 2019-20, 2020-21, or 2021-22 income years to offset previously taxed profits in 2018-19 or later years. All this is seen to create a refundable tax offset that can be claimed this financial year or next. The good news is that this will now be accessible to 1 million businesses and up to 8.8 million Australians.
The release of the FY20-21 federal budget and the extension of the First Home Loan Deposit scheme will be a welcome respite to the building industry. Although first home buyers will feel better supported in buying a new home or investing in a new property, borrowers need to continue to be wary of taking on additional debt. Finding the right property and finding the correct loan with favourable terms is crucial.
If you’re exploring your first home loan options or looking for ways to buy property in Sydney, our team at Shore Financial can help you consider the options available to you and better explain whether you’re eligible for the FHLDS
Get trusted home loan advice from the experts. Call Shore Financial today.