HomeBuilder is off to the races

An interesting data point from Eliza Borrello for ABC News in “Can HomeBuilder be used as a deposit? Questions leave prospective house buyers confused”. After less than a week since HomeBuilder was announced:

… more than 208,000 people had visited the Federal Government's HomeBuilder webpage and more than 15,600 Australians had registered an interest.

It’s off to a good start as the government had expected 27,000 Australians to apply for it.

There’s also a bit of useful information addressing whether the $25,000 HomeBuilder grant can go on a deposit:

NAB:

The ABC understands NAB customers will be able to put HomeBuilder grants towards a deposit, but the total deposit required will not change.

ANZ:

An ANZ spokesman said the $25,000 could be used as part of the equity a customer contributed to building costs, as long as a loan was not subject to lenders mortgage insurance (LMI).

LMI is insurance borrowers have to take out if they have not saved a 20 per cent deposit for their home.

CBA and Westpac didn’t respond with clear guidance. So right now, the quick answer is that it depends on the lender with many still figuring out how to work it into their lending criteria.

Government grants for first home buyers - state by state

Great read for first home buyers by Ellen Lutton in “This is how much money the government is giving first-home buyers to buy or build new, state by state” for Domain. Here’s a summary for NSW and VIC:

NSW – $35,000

On top of the new HomeBuilder grant of $25,000, NSW first-home buyers already have access to a $10,000 grant for new properties costing less than $600,000 and owner-builder/building contracts worth less than $700,000.

If you’re buying land to build a new home, the total price – including the land and home – must be no more than $750,000. 

There is also no stamp duty payable on property under $650,000, or vacant land under $350,000, while properties between $650,000 to $800,000, or vacant land between $350,000 to $450,000 get discounted stamp duty.

Victoria – up to $45,000

Victorians already had a $10,000 grant available for new first homes, and $20,000 for new homes built in regional areas, valued at $750,000 or less. They also don’t pay stamp duty on property under $600,000, with discounted stamp duty applying on property between $600,000 to $750,000.

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.