12 May What does the budget mean for you?
Earlier this week the federal budget came out, with there being a few different measures in place to help first home buyers and some to motivate existing home owners to downsize to free up larger properties for young families. If you haven’t caught up with the changes, you may be wondering what it means for you. We’re here to explain exactly that.
First home buyers
The federal government has announced plans to allow people to put a portion of their income into their superannuation, which they can then use for part of a home deposit. The problem that first home buyers need to take into consideration is that when this money is drawn out, it must be paid back later on so there aren’t any issues later on in retirement. If it wasn’t paid back then it would just be shifting financial problems to another day. It’s important that first home buyers consider the likelihood that the measures will just lead to a property price hike. Unfortunately for first home buyers, the prices are likely to increase based on previous circumstances. That would not lead to greater affordability. First home buyers would only be able to take up to $30,000, which is still short of the required deposit in Sydney and Melbourne, with most deposits being double that. The measures also do not factor into the equation the repayments on a mortgage. It is unlikely to help first home buyers as per our previous blog post. Some reporters have responded by joking about the measures by saying that it will now only take 180 years to pay off a home, meaning it is still out of reach. Others are concerned that the measures will have the opposite effect and that prices will only increase even further.
If you are thinking about downsizing to a smaller home then the government says that they will offer you incentives to do so. It’s not all rosey though. Retirees who downsize will be given incentives to sell their home. If they sell their home they can invest up to $300,000 extra into their superannuation scheme. Currently people can only invest up to $100,000 extra per annum. There are however conditions. The seller must have held their home for ten years prior, Whether or not this would act as an incentive for people to sell their properties remains to be seen however with the property peak over, it’s likely that some people will sell.
So there you have it. If you’re a first home buyer or a downsizer in one of the major cities, it’s unlikely that the budget will help you with your property issues. First home buyers are still going to need to save for at least ten years, and with wages dropping it’s unlikely that will change anytime soon. The downsizers will still need a new property to live in, and that is likely to drive the price of smaller units or houses up, meaning that the situation remains at the status quo.
There is no quick fix to housing affordability in Melbourne and Sydney, and it looks like those at the top and bottom of the property ladder will both face issues.
If you’re wondering how you are personally affected by this year’s budget then contact our friendly team for a confidential discussion.