On Thursday the Australian government announced the HomeBuilder stimulus scheme, offering $25,000 cash grants for buyers of freshly built homes or those renovating their property.
This is a $668 million plan from the Property Council of Australia as part of its seven-point plan to the National Cabinet for starting up construction again and the economy.
Unlike many of the first home buyer grants of between $7000 – $20,000 administrated by state governments, this new scheme will have its limitations, and it cannot be used by anyone who’d just like to build a new patio, pool, tennis court or cheaply renovate their bathroom or kitchen.
To access HomeBuilder, owner-occupiers must meet the following eligibility criteria:
- you are a natural person (not a company or trust);
- you are aged 18 years or older;
- you are an Australian citizen;
- you meet one of the following two income caps:
- $125,000 per annum for an individual applicant based on your 2018-19 tax return or later; or
- $200,000 per annum for a couple based on both 2018-19 tax returns or later;
- you enter into a building contract between 4 June 2020 and 31 December 2020 to either:
- build a new home as a principal place of residence, where the property value (house and land) does not exceed $750,000; or
- substantially renovate your existing home as a principal place of residence, where the renovation contract is between $150,000 and $750,000, and where the value of your existing property (house and land) does not exceed $1.5 million;
- construction must commence within three months of the contract date.
With the ‘HomeBuilder’ scheme, the $25,000 cash grant will be restricted to people on middle incomes and to new homes and major renovations valued between $150,000 to $750,000.
If you meet the eligibility criteria, you can apply for the $25,000 grant between now and December 31, with the work contracted to start within three months of the contract date.
Grants must be spent to:
- Build a new home as a principal place of residence valued at up to $750,000 (including land); or
- Substantially renovate an existing home as a principal place of residence, with renovations valued at between $150,000 and $750,000 and the dwelling not valued at more than $1.5m before the renovation.
Even the cheapest renovation eligible for the scheme ($150,000) would require a grant recipient to spend at least $125,000 of their own money -meaning the scheme is most likely to be accessed by those with substantial savings or a willingness to borrow.
The renovation can be a combination of works (eg, a kitchen and bathroom renovation) but must be supervised by a registered or licensed builder.
Prime Minister Scott Morrison noted that the “average price” for building a new home is $350,000, which suggests houses that roughly double the average will be eligible.
The Housing Industry Association estimates at least 14,000 renovations costing over $150,000 are undertaken every year.
In addition to the grant, this proposed stimulus package would also include funding for renovations to make homes more resilient to natural disasters and funding for commercial programs, such as cladding and asbestos rectification.
Related: Make your home sustainable
This scheme came under way amid the Reserve Bank of Australia’s (RBA) warning that the housing sector would face an extended period of hardships as Australia’s economy falls into a recession – probably the worst recession in 90 years.
Home builders have already reported contract cancellation rates of more than 30% since the shutdown of key parts of the economy in order to prevent the spread of the COVID-19 virus.
The construction sector employs more than 1.1 million people and it has shed at least 5% of its workforce since March 2020, which was noted in the minutes of the RBA’s June meeting.
This new ‘HomeBuilder’ scheme would stimulate the constructions of at least 30,000 dwellings by December and support 200,000 jobs.
The scheme is forecast to cost taxpayers $688 million. But it is uncapped, so its final cost will be determined by how popular it is – it may cost more, it may cost less.
The Government estimates the scheme will fund about 27,520 projects (at $25,000 each).
The housing sector is critical to the Australian economy. Our #HomeBuilder program is designed to boost construction to create jobs & grow our economy. #HomeBuilder will provide a $25k grant to eligible owner-occupiers to build a new home or renovate an existing home🏡. pic.twitter.com/ke211eX1Ez— Josh Frydenberg (@JoshFrydenberg) June 3, 2020
Ken Morrison, Chief Executive of the Property Council of Australia, said the Australian economy requires “big and bold thinking” to get going again following the effects of the COVID-19 pandemic.
“As Australia’s biggest employer which contributes over 13% of GDP, the property industry can be a powerhouse behind economic recovery and growth with the right policy settings and market incentives from the federal, state and territory governments,” Mr Ken Morrison said.
The release of this new proposed scheme comes after the RBA’s concern and the new forecasts from the Housing Industry Association (HIA) of a near 50% fall in new home building which could put half a million jobs at risk over the next year.
Another new economic modelling plan was commissioned by Master Builders Australia, who found a $40,000 uncapped new home building grant would deliver 14,000 extra new homes and replenish most of the constructions jobs that have been lost.
Denita Wawn, CEO of Master Builders said in a media release the construction industry was one of the worst hit sectors by the pandemic and urgent government support was needed.
“We are seeking stimulus not subsidies from government, we want the National Cabinet to urgently implement this independently modelled stimulus package and establish a special task force to fast track commencement of construction activity.” Ms Wawn said.
“We know from previous downturns that it takes four times longer for our industry to recover than the rest of the economy.”
Under the proposed stimulus package, a $13.2 billion investment from governments would deliver:
- $30.9 billion in GDP growth;
- 105,500 jobs in construction and across the economy; and
- $17.6 billion in expanded construction activity (new dwelling starts, renovations and commercial construction activity
Their proposal comes only a week after the Property Council of Australia lobbied the ‘New Home Boost’ scheme.
“There is no time to spare in meeting this threat to the viability of nearly 400,000 building businesses and the jobs of 1.2 million people employed in our industry.”
Ms Wawn added Master Builders wanted to see a dedicated building and construction industry taskforce established to oversee the implementation of the stimulus package.
“For stimulus to occur building activity needs to commence. Builders and tradies cannot sustain their businesses and jobs on promises,” Ms Wawn said.
Words by Ece Demir
Last updated: 9 June 2020
If you’re thinking of building a new home or renovating your current one, the team at eChoice are here to help! Contact us today and we’ll help you work out if you’re eligible for this scheme.