In a significant milestone for the housing industry, the Help to Buy Bill 2023 was passed by the Senate in late November.
The bill aims to make homeownership more accessible for lower-income and middle-income Australians through a shared equity scheme. It is designed to reduce the barriers to entering the property market, particularly for those struggling to save for a deposit.
What is the Help to Buy Scheme?
This is a federal government initiative that will assist eligible home buyers by co-purchasing up to 40% of a new home or 30% of an existing home. The program reduces the upfront costs for buyers, which not only reduces the deposit required but also the mortgage required – which, in turn, reduces the monthly repayments that need to be paid.
The scheme operates as a shared equity model, meaning the federal government will retain a stake in the property. Homeowners will then have the option to buy the government’s share if their financial situation improves. Or, if the property is sold while still under joint ownership, the government will receive their share of the sale proceeds.
How does it work?
Eligibility
To qualify for the scheme, buyers must:
Eligible participants must have at least 2% deposit saved and will need to cover upfront costs like stamp duty.
Costs
Mortgages for Help to Buy recipients will be available through a select list of lenders approved by Housing Australia.
Buyers will not be required to pay lender’s mortgage insurance, despite the small size of the deposit (as the federal government will be guaranteeing the loan).
Recipients will be responsible for the ongoing costs of the property including maintenance, strata fees and bills.
Participants will not need to pay rent on the government’s share.
Starting date
There will be 10,000 spaces available each year over the next four years. As soon as the bill is officially passed, the scheme will become available in the Northern Territory and ACT.
However, start dates are not yet confirmed for the states. That’s because the scheme will be administered by each state, so states will need to pass their own legislation in order for Help to Buy to operate in their jurisdiction.
Who will benefit?
With the eligibility requirements set at $90,000 annual income for individuals and $120,000 for couples, the Help to Buy scheme is primarily aimed at lower-income and middle-income Australians who may find themselves excluded from homeownership, particularly given how much property prices have risen since the pandemic.
“Right across the country Help to Buy will be life-changing, bringing home ownership back into reach for thousands of Australians, particularly renters,” said former Minister for Housing Julie Collins.
Price caps
Depending on where you live, there will be a price cap that dictates the value of the home you can use the scheme for. These are calculated on the median dwelling price in that location and reflect the different property market conditions in each state and territory.
| State | Price cap capital city & regional centres | Price cap rest of the state/territory |
| Australian Capital Territory | $750,000 | $600,000 |
| New South Wales | $950,000 | $750,000 |
| Northern Territory | $600,000 | $550,000 |
| Queensland | $700,000 | $550,000 |
| South Australia | $600,000 | $450,000 |
| Tasmania | $600,000 | $450,000 |
| Victoria | $850,000 | $650,000 |
| Western Australia | $600,000 | $450,000 |
Potential considerations
While the Help to Buy scheme will offer several benefits to eligible buyers, it is also important to consider the potential drawbacks before you apply.
Limited places: The scheme will be available to just 10,000 applicants a year.
Government recourse: If the government ends its arrangement with you, you’ll have a set amount of time to pay back the government’s share of the property. There are several reasons the government may decide to terminate the agreement, including not being satisfied you are meeting the timeframes agreed to in the arrangement. This is particularly important for buyers purchasing a newly built home as there will be certain date requirements for your building project set out in the arrangement.
Income: If you start earning more than the mandated threshold for two consecutive years, you will be required to repay the government’s financial contribution either in part or as a whole, depending on your circumstances.
Participating in Help to Buy
Given the complexities of the scheme, it is recommended you work with a mortgage broker who will be able to assist you with your application for Help to Buy.
Your mortgage broker will be able to advise you on the arrangement as well as on the market trends that will influence your purchase.
Are you interested in finding out more about your options through Help to Buy? Call Shore Financial on 1300 416 700, email us on info@shorefinancial.com.au or fill in this online form.
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