The Federal Help to Buy scheme, where first home buyers partner with the government to purchase a home, has been significantly revamped.  

After criticism from The Good Builder and others, the scheme’s income and property price caps have been increased to make it more useful for buyers. 

Under the revised scheme, a buyer with a borrowing capacity of $600,000 can now buy up to a $1,000,000 house and land in SEQ, with the Government chipping in the remaining $400,000. 

Deposit requirements are as low as 2%. 

This may have a significant impact on the first home buyer market across Australia, and for buyers willing to share their property ownership with the Government, it will open up a raft of more central areas for them to purchase. 

For example: A client with a budget of $550,000 would be lucky to find a house and land option in outer Gympie, which can now be bought in central Sunshine Coast or within Brisbane City Council. 

While they will only have to make repayments on their 60% of the property price, they will only receive 60% of the capital gain on selling, and the property must be continually used as their principal place of residence. Buyers can ultimately buy the government out over time. 

When the ‘Help to Buy’ scheme was first introduced, it was heavily criticised for the absurdly low price caps, set at $700,000 in SEQ, $850,000 in Melbourne, and $950,000 in Sydney. 

The QLD cap, in particular, made it very difficult for the scheme to gain any traction in Queensland. 

See the changes below: 

Income Price Caps increased

The new changes have also seen the income caps increased from 90,000 to $100,000 for individuals, and from $120,000 to $160,000 for couples and single parents.

This means significantly more people will be able to access the scheme. 

What does this mean for builders?

A much larger proportion of first home buyers will now be able to make it into the market, and they can partner with the government in a 60% / 40% split in buying a new home. 

For example: if a client can currently only afford to borrow $600,000, they will now be able to buy a $1,000,000 house and land product, townhouse or terrace product. 

Hat’s off to Housing Minister Clare O’Neil for finally taking heed of the calls, and drastically increasing the price caps. 

How the scheme works

The Help to Buy scheme will allow people to co-purchase a home with the government.

Housing Australia will act on behalf of the Commonwealth to give home buyers equity contributions of up to 40% for a new home, and 30% for an existing property.

They only need a 2% deposit and the Government’s equity will push it up over 20% which will take Lenders Mortgage Insurance out of the equation.

Buyers will only have to pay a mortgage for their share of the property and won’t need to pay rent on the stake owned by the government. 

People can buy a house, townhouses, or unit under the scheme, but there is a price cap, and mortgages will only be possible with lenders approved by Housing Australia. 

There are 10,000 spots around the country each year for 4 years.

Who is Eligible?

• You must be an Australian citizen and at least 18 years of age
• You must satisfy the financial capacity test, which rules out people who could purchase the property without the scheme’s help
• If you’re buying on your own, you’ll need to have a yearly income of less than $100,000. And if you’re buying with someone else, your combined income must be less than $160,000
• You must not own any other land or property in Australia or overseas
• You must live in the house

Author: Peter Love

Pete was the General Manager of one of Australia’s largest home builders for six years, before starting his own business as a buyers’ advocate, building over 200 homes in five years across South East Queensland and working with over 20 builders to deliver them. Across this time he has seen most facets of the industry, the good, the bad, and the beautiful.