Laura Akhurst - 14 Dec, 2016

Why Australia Needs the UK’s Affordable Home Scheme

Scroll Down

Australia has some of the most expensive property in the world, which prevents many first home buyers entering the market. The Australian Government have introduced some incentive schemes and first home buyer schemes. But, saving the required home deposit is still difficult. This situation is when the UK’s “staircasing” method of home buying could be an effective solution.

What is Staircasing?

Staircasing allows a home buyer to purchase home shares, rather than buying the entire property. Over time, as the homeowner can afford it, they buy more shares and gradually increase their property ownership. Thus, they can climb the “staircase” to owning their home.

What’s more, the staircasing system is available to households earning under £80,000 per annum, or £90,000 if buying in London. Under this scheme, prospective homebuyers need to buy a minimum of 25% of the property. Although, they cannot buy more than 75%. All purchases are also via a mortgage, with the rest of the home then rented from the UK housing association.

Such an innovative approach to home buying is a part of the UK Government’s “Help to Buy” program. Other incentives in this scheme include home savings accounts, government-backed equity loans, and mortgage guarantees.

Will Staircasing Come to Australia?

Major Australian banks see staircasing as a trend that will take off in the future. These lenders view staircasing as an innovative way for Australians to break into the market. Plus, they also predict that this trend will have a significant impact on how Aussies buy and sell property. Moreover, staircasing may also alter how financial institutions meet lending needs in the future.

Could Staircasing Work in Australia?

Australia offers first home buyers and low-income earners equity loans. Such loans have a low-interest rate and are government subsidised. Thus, the government subsidy goes towards your home deposit or increases your borrowing power. Nevertheless, while most Australian states have a shared ownership equity scheme, subsidy levels vary.

Overall, financial experts suggest the staircasing scheme could work well in Australia with such a scheme helping struggling families. In addition, they feel it’s time the Australian government introduced better schemes than what’s presently on offer.

What Problems are Associated with Staircasing in the UK?

While the staircasing program has helped thousands of families in the UK to buy their home, it has received criticism. Scheme critics argue that home buyers using the program have reduced rights. For instance, each staircasing home buyer must pay all service charges or maintenance costs in full. But, critics feel that basing these costs on the proportion of ownership is much fairer.

Furthermore, when it comes time to sell the property, the sale is split based on the original agreement. So, any home improvements that the homeowner has made to the property do not get considered. Another reason is that the selling of the home is through the housing association, not on the open market. Hence, critics feel that the home may not achieve a fair and reasonable price when sold.

Opponents of the scheme argue that 25% of the purchase price is still hefty, especially in Sydney markets. Also, many buyers in these markets will not be able to staircase their way to full ownership.

Given these issues, then experts recommend a revision of the model so it works effectively in Australia. Notably, the program would also need to be extensively researched before introduction, and well-regulated.

Suggestions that staircasing should not be the only option have also come forth. There have been recommendations that low-income earners should be able to access their superannuation to buy a home. For instance, first home buyers could use their superannuation as a deposit towards buying a home.

Do you want to know more about first home buying? Then contact eChoice. Our brokers can help YOU find an affordable home loan.

You might also like:

Get your tailored home loan report. Start Now