HomeBuilder winners and losers

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on June 05, 2020
HomeBuilder winners and losers

Photo by Annie Gray on Unsplash

With more than 24 hours passing since the HomeBuilder scheme was announced, the dust has settled and people have had more time to assess its pros and cons.

Prime Minister Scott Morrison said the scheme, which provides a $25,000 grant for new home builds and renovations that meet the criteria, aims to spark a 'tradie-led' recovery to help boost the economy, which as of this week is adjudged to be experiencing its first recession in 29 years.

“If you’ve been putting off that renovation or new build, the extra $25,000 we’re putting on the table along with record low interest rates means now’s the time to do it," Mr Morrison said. 

To be eligible for the HomeBuilder scheme, you must:

  • Be an Australian citizen aged 18 years or older and be an individual, not a company or trust.
  • Be on an income of less than $200,000 for couples, and $125,000 for singles.
  • Be spending between $150,000 and $750,000 on a renovation for a home that has been previously valued at less than $1.5 million; or
  • Be building a new home worth less than $750,000 (this includes land value). 

The scheme also can't be used for an investment property and all construction work must be done with licensed builders. More details on the scheme can be found here

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Lender

Variable
More details
UNLIMITED REDRAWS
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWS

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
REFINANCE ONLY
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
REFINANCE ONLY

Variable Rate Home Loan – Refinance Only

  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
  • Low rate home loan with added benefits, add offset for 0.10%
  • Save thousands & make an environmentally conscious choice on your loan for homes less than 12 months old
  • Get a 7.0 star NatHERS rating or higher for up to 1.59% discount on your variable rate home loan T&Cs apply

Green Home Loan (Principal and Interest)

  • Low rate home loan with added benefits, add offset for 0.10%
  • Save thousands & make an environmentally conscious choice on your loan for homes less than 12 months old
  • Get a 7.0 star NatHERS rating or higher for up to 1.59% discount on your variable rate home loan T&Cs apply

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of August 7, 2022. View disclaimer.

Now that the full details of the scheme has been announced and a full day has passed giving people time to assess it, the HomeBuilder scheme has had a mixed reception. 

The Government estimates the scheme will fund about 27,520 projects (at $25,000 each), boosting the economy and providing jobs for the Australian construction sector, which employs around 10% of the workforce. 

Housing industry groups have rallied around it, while other groups, such as the Labor Opposition and various research groups and social housing advocates, have said the scheme is too narrow in its targeting and will result in those who need it most missing out. 

Read: How the experts reacted to HomeBuilder

The HomeBuilder program winners and losers

According to the Real Estate Buyers Agents Association (REBAA), the winners of this scheme are homeowners with approval for renovations already in place or those with the cash ready to go, with president Cate Bakos saying it is a windfall for those who have been sitting on their hands waiting to renovate. 

However she also said local council approvals for renovations could be an obstacle - the scheme is only available for attached renovations of $150,000 or more, which take time to get approved. 

“This is a great opportunity for those homeowners who may have put off their plans to renovate because of COVID-19,” Ms Bakos said.

“The six-month timeframe to design a renovation, get council approval (if necessary) and source and appoint a builder does make it challenging for those who could potentially get bogged down in the planning approval process.

“For those people who already have the design and planning approval in place or whose renovations don’t require planning approval, this is like winning the lotto.”

According to REBAA, other winners of the scheme include those who've bought house and land packages and are yet to appoint a builder, and those looking to upgrade or downsize their homes. 

The 'losers' meanwhile, if you want to use that term, include:

  • Anyone unable to fund $150,000 renovation and can’t borrow.
  • Anyone above the income threshold.
  • Anyone who can’t find a qualified builder in time to sign a contract.
  • Anyone whose plans could potentially get tied up in planning approval.
  • Anyone whose builder’s qualifications don’t meet the grant requirements.

Ms Bakos also said she did not foresee house prices being significantly impacted as she doubted it would cause large numbers of home buyers to purchase.

“I don’t believe it’s a mainstream strategy that would precipitate a purchase based on the program itself,” she said.

"Any buyer (particularly a first home buyer) who buys with a view to renovate to take advantage of the grant, would need to be extremely well planned to accommodate a settlement period, renovation plans and then appoint a builder with this tight timeframe.

“If that is your strategy, make sure you select a good quality property with good growth prospects and suitable rental yield for your cash flow position in case it
becomes an investment later down the track.”

Compare construction loans

Lender

Variable
More details
  • Interest Only during construction
  • No monthly, annual or ongoing fees
  • Get Australia’s lowest rate construction loan when you go green

Green Construction Home Loan (Interest Only)

  • Interest Only during construction
  • No monthly, annual or ongoing fees
  • Get Australia’s lowest rate construction loan when you go green
Variable
More details
UNLIMITED EXTRA REPAYMENTS
  • Interest Only during construction
  • No monthly, annual or ongoing fees
  • Get Australia’s lowest rate construction loan when you go green
UNLIMITED EXTRA REPAYMENTS

Basic Home Loan (Principal and Interest) (LVR < 60%)

  • Interest Only during construction
  • No monthly, annual or ongoing fees
  • Get Australia’s lowest rate construction loan when you go green
Variable
More details
100% FULL OFFSET ACCOUNT
  • Interest Only during construction
  • No monthly, annual or ongoing fees
  • Get Australia’s lowest rate construction loan when you go green
100% FULL OFFSET ACCOUNT

Offset Package Home Loan (Principal and Interest) (LVR < 60%)

  • Interest Only during construction
  • No monthly, annual or ongoing fees
  • Get Australia’s lowest rate construction loan when you go green
Variable
More details
100% FULL OFFSET ACCOUNT
  • Interest Only during construction
  • No monthly, annual or ongoing fees
  • Get Australia’s lowest rate construction loan when you go green
100% FULL OFFSET ACCOUNT

Offset Package Home Loan (Principal and Interest) (LVR 60%-70%)

  • Interest Only during construction
  • No monthly, annual or ongoing fees
  • Get Australia’s lowest rate construction loan when you go green
Variable
More details
100% FULL OFFSET ACCOUNT
  • Interest Only during construction
  • No monthly, annual or ongoing fees
  • Get Australia’s lowest rate construction loan when you go green
100% FULL OFFSET ACCOUNT

Offset Package Home Loan (Principal and Interest) (LVR 70%-80%)

  • Interest Only during construction
  • No monthly, annual or ongoing fees
  • Get Australia’s lowest rate construction loan when you go green
Fixed
More details
  • Interest Only during construction
  • No monthly, annual or ongoing fees
  • Get Australia’s lowest rate construction loan when you go green

Tailored Investment Loan Fixed (Principal and Interest) 1 Year

  • Interest Only during construction
  • No monthly, annual or ongoing fees
  • Get Australia’s lowest rate construction loan when you go green
Fixed
More details
  • Interest Only during construction
  • No monthly, annual or ongoing fees
  • Get Australia’s lowest rate construction loan when you go green

Fixed Rate Investment Loan (Principal and Interest) 1 Year (LVR > 80%)

  • Interest Only during construction
  • No monthly, annual or ongoing fees
  • Get Australia’s lowest rate construction loan when you go green
Variable
More details
  • Fast turnaround times, can meet 30-day settlement
  • No ongoing fees
  • Unlimited extra repayments

Construction Home Loan (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • No ongoing fees
  • Unlimited extra repayments

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of August 7, 2022. View disclaimer.

Scheme too limited

Ms Bakos' sentiments about HomeBuilder being "not mainstream" is one of the main criticisms it has copped. 

While the Prime Minister, as well as the likes of Treasurer Josh Frydenberg and Housing Minister Michael Sukkar, say the scheme is designed to support a million-plus jobs over the next nine months, Labor and the Greens said HomeBuilder is far too tightly targeted to provide the required economic support. 

"This package is one tenth of the size of what the Rudd government rolled out in the GFC and it's arguable that the economy and the construction sector is in a far worse situation now than then," Labor's housing spokesman Jason Clare said.

Simply put, too many people will miss out on being able to use the scheme, such as rural Australian Peter Knobloch, who told Savings.com.au that he and his wife weren't eligible for the grant due to land value being included in the value of a new home build. 

Mr Knobloch said he and his wife had bought a block of land for $350,000, closer to the coast to escape bushfires and planned to build a modest $500,000 home on the block, but as the total cost exceeds $750,000, Mr Knobloch doesn't qualify.

"How can somebody that has a $1.5 million home be able to do a renovation for up to $750,000, and yet you're trying to build a modest home under the circumstances we find ourselves in and not qualify," he said. 

"It's not stimulating the economy." 

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Picture: The land Mr Knobloch and his wife bought for $350,000

Social-housing advocates have also criticised the scheme's lack of availability. 

The Australian Council of Social Service (ACOSS) CEO DR Cassandra Goldie said there is a massive shortfall of social housing, and that there is a clear need for the construction of around 30,000 social homes. 

“There is no argument that the construction sector needs a shot in the arm, but this money will not go where it is most needed. It will largely benefit those on middle and higher incomes undertaking costly renovations, without any related social or environmental benefits," Ms Goldie said. 

“We are in a recession, with more and more people struggling to pay rent, which will only lead to greater homelessness.

“We should be focusing on ensuring everyone has a roof overhead, not on government support for people who are relatively well off to upgrade their roofs."

This rhetoric has been backed up by the likes of the Grattan Institute's Program Director of Household Finances Brendan Coates, as well as Labor Leader Anthony Albanese himself, who called a lack of social housing stimulus the plan's "biggest weakness". 

“There’s nothing wrong with supporting private housing – that’s a good thing – but this package today will require $150,000 of expenditure at a time of economic uncertainty. Not many people have $150,000 ready to go, ready to sign a contract,” Mr Albanese told ABC News.

Some financial commentators, such as Director of Switzer Financial Group Peter Switzer, have called on the Federal Government to "renovate" the scheme by making it less restrictive. 




Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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