Federal Government introduces the Homebuilder Scheme

Stuart Marsh, reports for Nine News about the new Homebuilder Scheme in “HomeBuilder Scheme Explained: How to access $25,000 for home renovations”. It’s a good read and has a nice infographic. The scheme is unfortunately quite narrow and there’s so many rules that it quickly becomes confusing.

I’m going to try to summarise the main gotchas but for all the details, read the article or the factsheets on the Australian Government website linked to at the end of the article. You can get $25,000 from the government for new builds and renovations for your principal place of residence (no investment properties).

New Build Gotchas

• The value of the new home including land must be worth $750k at most

Renovation Gotchas

• Must be “to improve the accessibility, safety and liveability of the dwelling” which rules out swimming pools, spas, saunas, sheds, unconnected garages and tennis courts.

• Renovation contract cost must be between $150k and $750k and the value of the existing property (house and land) cannot exceed $1.5 million.

Means Testing Gotchas

• For an individual applicant, the income cap is $125k p.a. based on your 2018-2019 tax return or later

• For a couple, the income cap is $200k combined income

The scheme is suitable for those looking to purchase a house and land package, an off-the-plan apartment or a new build. It can help renovators too. I generally feel positive about the package. I know many hoped it would apply more broadly and have less gotchas but it’s understandable that the government needs to limit spending after all the spending they've had to do with JobKeeper, JobSeeker, etc. I just hope it goes far enough to help out the building industry who are hurting right now.

Useful Pages on the Australian Government Site:

About Homebuilder

Factsheets - these both go into detail regarding eligibility:

Fact Sheet on Homebuilder

FAQs on Homebuilder

RBA June 2020 Decision - Rates Maintained

The RBA has released the Monetary Policy Decision statement by Phillip Lowe:

At its meeting today, the Board decided to maintain the current policy settings, including the targets for the cash rate and the yield on 3-year Australian Government bonds of 25 basis points.

…

The substantial, coordinated and unprecedented easing of fiscal and monetary policy in Australia is helping the economy through this difficult period. It is likely that this fiscal and monetary support will be required for some time.

The Board is committed to do what it can to support jobs, incomes and businesses and to make sure that Australia is well placed for the recovery. Its actions are keeping funding costs low and supporting the supply of credit to households and businesses. This accommodative approach will be maintained as long as it is required. The Board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3 per cent target band.

Rates have been maintained at 0.25%. The RBA refers to our economic recovery as being highly uncertain. They don’t want to increase rates in order to support the economy but as they’ve mentioned in the past, they don’t want to drop rates any further. So unless something unexpected occurs, it sounds like rates will neither increase nor decrease in the near future.

How long will this price discount last?

Michael Janda, reports for the ABC News with “House prices edge lower in May but 'real test' will come after September, analysts say”:

CoreLogic's index showed a 0.4pc fall in national home prices over May

Melbourne had the steepest monthly decline, with a 0.9pc slide

Hobart had the strongest monthly price gains of 0.8 per cent, despite seeing one of the steepest falls in rents over the past two months.

It’s not much of a discount but who knows how long the slump will last. With Coronavirus case numbers stabilising at low levels, the economy could get going soon.

Getting rid of stamp duty might just be a pipe dream

David Thornton, reporting for Money Magazine with “NSW and Victoria push to scrap stamp duty but will land tax save you money?”

Calls for scrapping stamp duty are gaining traction in the midst of the COVID-19 pandemic, as the states look for ways to stimulate their battered economies.

Critics of stamp duty point to its transactional, front-end nature, and the burden that creates for first-home buyers and those looking to invest, upsize, downsize, or relocate.

The merits of removing this terrible tax has been debated ad nauseam, yet year after year, it’s still with us.

Don’t blame negative gearing for all price growth

In “A collapse in house prices won't necessarily be so bad”, Jessica Irvine opines for The Sydney Morning Herald | Fairfax:

And yet, chances are, things will get back to normal at some stage. And when they do, we will still live under a tax system that encourages excessive investment into property and supersized price gains. We could, of course, take this opportunity to fix that broken housing tax system. To reduce concessions for negative gearing and capital gains on housing. To abolish stamp duty in favour of a broad-based land tax.

I don’t like stamp duty but I don’t agree that our tax system is totally broken. It’s easy to blame property price growth on negative gearing but it isn’t quite so simple. There are many countries around the world that see price growth in their large cities and they don’t have a negative gearing system quite like ours. Furthermore, there isn’t price growth everywhere in Australia. Just take a look at regional towns - sometimes they don’t see price growth for decades.

So where is there consistent growth? Our state capitals. People conglomerate to the capitals for many reasons including access to work. The simple reason that properties there go up in price is that they are in high demand. With our population growth, and people still moving to cities, it’s no wonder that with high demand and limited supply, prices move up. Building costs also continue to march up, aggravating prices further.

Apartments and houses don’t fund themselves. Property investors have to take the risk and the burden of owning a property. On the other hand, many people simply prefer to rent rather than own. Without investors that can afford to provide the capital and take the risk, there wouldn’t be places to rent!

Having been a tenant for many years, a home owner and then a property investor - I can see each side of the story. Yes it’s definitely possible to make money on property (I have also lost money on property) but at the end of the day, whether you win or lose, owning property is work (think bills, maintenance, keeping on top of repairs, dealing with tenants and agents etc). It’s a risk with no guarantee of success, and often means having to make sacrifices in order to be able to invest in the first place. It seems only fair that to those who take the burden, a fair reward ensues.

We’ve already had to rethink so many aspects of how we live during this crisis. Let's add housing, and the provision of safe, secure and affordable homes, to the list. If the crisis proves anything, it’s that we are more capable of change – of inventing new ways of doing things – than we know.

And there really is no place like home.

I can definitely agree with this - I have kids and I worry about how they will be able to afford a home too, as my parents did before me. I feel certain I’ll need to help them, just as they helped me. In any case, I agree that we should always ask whether the tax system and duties we’ve put in place still makes sense today and to find new ways of making home ownership possible for the next generation.

This pandemic has taught us that office workers can still get work done without actually going into the office. It has taught us that we can all be more self sufficient and cope well enough with online deliveries instead of needing to have all types of shops at hand. And perhaps enough employers will learn that remote working is viable for many of their employees and that with fast internet available to all, we don’t all need to congregate in large offices within large cities.