After a slow start to the year for the construction industry, new grants aim to boost activity for the building and construction sector, but strict eligibility conditions are confusing potential buyers.
The Federal Government’s HomeBuilder stimulus scheme is set to inject up to $668 million into the national economy by offering new cash grants to homebuyers, or those looking to undertake substantial renovations. The stimulus is intended to reinvigorate the construction industry and is an additional payment of $25,000 on top of each state’s existing first home buyer grant, which range from $7,000-$20,000.
You might also like: First Home Buyers Grant: Everything you need to know
🏡🛠 Today the Morrison Government announced the commencement of HomeBuilder, a program that will provide a $25,000 grant for eligible Australians to build a new home or substantially renovate an existing one.— Michael Sukkar (@MichaelSukkarMP) June 4, 2020
HomeBuilder will support more than 1 million Australian workers. pic.twitter.com/HxB2lUTCmJ
Despite receiving almost 35,000 registrations of interest just a month after the announcement of the funding, the scheme still has no timeline and little details are known about how it will operate or when buyers will be able to get their hands-on funds. Each state or territory is responsible for administering funds to buyers, and details of how this will work continue to be negotiated between state governments.
What we know about how the HomeBuilder scheme will work
The HomeBuilder grant is available to those building a new home or to those substantially renovating an existing home. In both cases, the home should be used as a principal place of residence. For those building, the property value (including land and house) cannot exceed $750,000. For renovators, the contract must be between $150,000 and $750,000 and the total value of the property cannot exceed $1.5 million.
The HomeBuilder funding is available to people who meet the following criteria:
- You are an individual (not a company or trust).
- You are aged 18 years or older.
- You are an Australian citizen.
- Based on your 2018-19 tax return of later, your income does not exceed $125,000 for individuals or $200,000 for couples.
- You sign your building contract between 4th June 2020 and 31st December 2020.
- Construction begins within three months of signing the contract.
According to the Housing Industry Association, at least 14,000 renovations costing upwards of $150,000 are undertaken in Australia each year.
You might also like: How will high unemployment affect Australia’s property market
Experts warn that few home buyers qualify for the grants and the difference in stimulus packages between states may confuse new buyers and stall the building process. Uncertainty over how and when the stimulus funding will be given to eligible homebuyers may also encourage those in the market to hold off until there is a better understanding of the scheme, and there is also fear of missing out, leaving potential buyers confused.
How effective has HomeBuilder been across the country?
According to Treasury data, a week after the scheme was announced 5,805 expressions of interest were received from Queensland, 5,900 from Victoria and 4,250 from New South Wales. But despite the interest, some of the nation’s largest property markets may not gain the most benefit from the additional funding.
The Treasury has predicted that the HomeBuilder scheme will deliver 27,000 grants across Australia, with around 7,000 of those expected to be for renovation works or rebuilds.
With almost 43,000 new homes being built in Sydney between 2018-2019, the Treasury predicted around 6,400 HomeBuilder grants to be claimed by New South Wales citizens. However, the strict conditions attached to the grants mean that it’s possible less than 1000 new builds will benefit from the subsidy in Sydney, accounting for just $25 million of the allocated funds.
With fewer than an estimated 1900 eligible titled or soon-to-be-titled lots likely to be available in Sydney within the HomeBuilder timeframe, alongside the capped property values in Sydney’s costly market, many potential New South Wales buyers may be excluded from the financial benefits of the scheme.
Despite a resurgence in coronavirus cases causing hotspot lockdowns throughout parts of Victoria and house prices in Melbourne falling 1.1% in the month of June, the Victorian state government is yet to announce a state stimulus package. Despite this, up-and-coming suburbs such as Roxburgh Park, Mitcham, Doncaster East, Cheltenham and Coburg saw the biggest jumps in tradesman enquiries for renovations following the announcement of the HomeBuilder scheme.
You might also like: Your guide to Melbourne’s property market
State government schemes boost HomeBuilder
Further state-wide incentive schemes have been announced. The Queensland State Government has announced an additional $15,000 subsidy for first home buyers purchasing property less than $750,000, as well a further $5,000 for those buying in regional locations. In Tasmania, the existing $20,000 First Home Owners Grant has been extended to include all Tasmanian owner-occupiers.
You might also like: New home boost grant as the RBA & HIA raise property concerns
But West Australian homebuyers are set to be the big winners when it comes to available grants, with the WA State Government providing an additional $20,000 grant for new home purchases, on top of the existing $10,000 First Home Owner Grant and increased stamp duty concessions. Combined with the HomeBuilder grants, West Australian buyers could save just under $70,000 on a property purchase.
Words by Danielle Austin
You don’t need to leave your house to get an eChoice home loan consultation – As always we will discuss your options over the phone – we’re here to make your home loan journey easier.