The Morrison Government has handed down its Federal Budget for 2022/23, and first home buyers in Perth have come out with plenty to celebrate.
Federal Budget forecasts suggest the future looks bright for the Australian economy.
The Budget points to healthy economic growth of 4.25% in 2021/22, followed by a 3.5% uptick in the economy the following financial year.
This growth is expected to drive unemployment nationally down to 3.75% in the September quarter of 2022 – its lowest level in almost 50 years.
A tight job market is expected to put workers in a strong position to negotiate higher wages, with the Budget forecasting wages to grow at their fastest pace in almost a decade.
As a guide, average earnings are expected to jump by 5% through the year to the June quarter of 2022, according to Government projections.
While these factors all hold positive flow-on effects for Australia’s property markets, first home buyers were arguably the biggest winners from this year’s budget announcement when it comes to real estate.
Home Guarantee Scheme explained for first home buyers
The real sweetener of the Federal Budget for first home buyers lies with the announcement of the newly expanded Home Guarantee Scheme (HGS).
This isn’t so much a new initiative, but rather a renaming and expansion of the popular First Home Loan Deposit Scheme.
35,000 guarantees annually for low deposit buyers
For the three years starting 1 July 2022, 35,000 places will be available annually for first home buyers to buy with just a 5% deposit – and pay zero lenders mortgage insurance (LMI). That’s an increase on the 10,000 guarantees currently provided annually by the First Home Loan Deposit Scheme.
Momentum Wealth’s Finance Team Leader, Caylum Merrick, said the expansion is a big step in improving market accessibility for first home buyers.
“Buying with a low deposit and zero LMI not only helps first home buyers get into the market sooner, it also means they avoid paying the additional cost of LMI over the life of the loan.”
“Both these factors have positive benefits for buyers’ long term financial positions, and can provide a significant head start for those hoping to expand their portfolio in future” he said.
What is the eligibility criteria for the Home Guarantee Scheme?
To be eligible for the Scheme, first home buyers will need to meet certain requirements.
At present, income limits apply – singles need to earn taxable income below $125,000 annually, rising to $200,000 combined for couples.
There are also limits to the price first home buyers can pay for their property. In WA, these range from $400,000 in regional areas, to up to $550,000 for new homes in Perth.
WA first home buyers well-placed to benefit
Caylum notes that first home buyers in Perth are especially well-placed to benefit from the expanded Guarantee.
“CoreLogic data shows that almost seven out of ten Perth properties fall below the maximum price threshold for the Scheme – the highest proportion across Australia’s state capitals.
“This compares very favourably with cities like Hobart (15.8%), Adelaide (21.9%) and Sydney (23.4%) where fewer than one in four homes meet the price limits,” he explains.
Portion of properties valued under the current First Home Loan Deposit Scheme thresholds
Accessing the Home Guarantee Scheme
There’s plenty of support out there for first home buyers looking to access the Home Guarantee Scheme.
However, it’s important to note that not all lenders have signed up to the Scheme.
“Our brokers have been able to access this Scheme for some of our first home buyer clients,” notes Caylum. “With the expansion of places kicking in from 1 July, it’s important to take action now so you can be ready to apply when the new places become available in just a few weeks.
“Our brokers can help you understand the eligibility requirements and what specific documents you will need to secure a spot.”
Want to find out whether your eligible for the Scheme? Contact Momentum Wealth today to book an obligation-free consultation with one of our brokers.