Homebuyers could be offered grant of $25,000 to build or renovate

author-avatar By on June 03, 2020
Homebuyers could be offered grant of $25,000 to build or renovate

Photo by Troy Mortier on Unsplash

Details of the proposed homebuyers grant are still scarce as the government works to finalise the scheme, but early reports say the grant could be around $25,000.

**BREAKING: Full details of the $25k HomeBuilder grant have been announced**

Homebuyers could be offered a grant of up to $25,000 to build new homes or make substantial renovations to their existing home, according to early reports.

News.com.au yesterday confirmed that renovators will have to "match the 'free' cash by more than a dollar for a dollar" and demonstrate "substantial spending" meaning that smaller, DIY projects such as a paint job will be out of the question under the scheme.

Prime Minister Scott Morrison said the scheme is designed to target over 380,000 tradies' jobs which have dried up in the wake of the COVID-19 pandemic. 

“We are more interested in the larger projects and new home builds and things like that,” Mr Morrison told 2GB on Monday.

“We are looking at a bit of drop off in that current home building that’s going on. That’s not good for tradies and not good for jobs.

“The tradies and all the others – the apprentices and others who work in that home building sector are going to feel a lot of pain unless we can keep a continuity in the business with house construction. A big part of coming out of the COVID-19 crisis is our infrastructure spending.”

It is understood a means test will be applied to the grant which is expected to be announced as early as Thursday.

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
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
LIMITED TIME OFFER

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%
LIMITED TIME OFFER

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%
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
FixedMore details
NO UPFRONT OR ONGOING FEES

Basic Home Loan Fixed (Principal and Interest) (LVR < 70%) 3 Years

NO UPFRONT OR ONGOING FEES

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 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. Rates correct as of October 20, 2021. View disclaimer.

The building industry has been hit hard by the pandemic, with estimates from the Housing Industry Association (HIA) of a near 50% drop in new home building which could put half a million jobs at risk over the next year. 

The government hopes the construction stimulus will prevent a 30% to 50% drop in residential construction, which would damage supply and housing affordability further down the track.

Data released by the Australian Bureau of Statistics on Wednesday shows the number of dwellings approved rose by 1.0% in April in trend terms.

However, approvals for the construction of new homes fell by a seasonally adjusted 1.8% in April, lower than the 10% decrease that was expected.

This was driven by an 8.9% decrease in approvals for private dwellings which includes apartment blocks and townhouses. Private sector house approvals rose 2.7%.

"The rise in April was driven by both private sector dwellings excluding houses (1.0%) and private sector houses (0.8%)," ABS Director of Construction Statistics Daniel Rossi said.

"These results are consistent with leading indicators in early 2020, prior to the onset of the COVID-19 pandemic restrictions.

"Building approvals typically lag early indicators of housing demand, such as new home sales and new loan commitments."

Homebuyer grant draws mixed feedback

Government stimulus in the construction sector hasn't always been successful, with the Rudd government's infamous pink batts saga a prominent example. 

Director of Switzer Financial Group Peter Switzer said although this stimulus package looks "less potentially threatening", it could still have negative political consequences if it encourages rorting and falsification of quotes and jobs completed.

"This will require some top notch processes that public servants aren’t always good at creating," Mr Switzer wrote.

"On the other hand, they can’t produce applications for the money that result in too much red tape, or else a good economic idea could end being a political disaster."

There are also concerns that calls for homebuyer grants will cause many customers to stop making inquiries and delay their construction or renovation plans and wait for the grant to commence, something that could send smaller builders under.

Some builders are already reporting a drop-off in commitments from purchasers who are sitting on their hands.

A number of prospective home builders in Australia have told Savings.com.au they are considering delaying their construction plans because of the proposed grant.

The Real Estate Industry of Australia (REIA) has called for caution over the package, saying it could be detrimental to the industry.

“The REIA is concerned that measures which are directed at assisting the purchase of new dwellings in preference to existing dwellings could have a detrimental impact on buyer choice and market activity and thus lessen the economic impact," said REIA president Adrian Kelly.

Mr Kelly said less than 20% of Australian first home buyers prefer to buy new homes.

"These choices are made on affordability of older dwellings in locations that provide proximity to work, leisure activities and infrastructure including public transport," he said. 

“To limit any assistance to first home buyers to only new dwellings could lead to sub optimal outcomes in the utilisation of existing property and infrastructure.”

However, the grant will be made available for everyone - not just first home buyers. 

Brendan Coates, the Grattan Institute's Household Finances program director said money for social housing, not homebuyer grants, is the key to construction stimulus.

"Grants will likely see in-demand tradies raise their prices, especially if the government is effectively paying for most of the work done. It will also be harder for officials administering the scheme to determine if the work has been done before paying out the money," Mr Coates said.

"There’s a better way to support residential construction without providing such big windfalls to developers: Fund the building of more social housing.

"Building 30,000 new social housing units today would cost between A$10 billion and A$15 billion. Because state governments and community housing providers won’t have to worry about finance, marketing and sales, they’ll be able to get to work building homes much quicker than the private sector.

"The boost to the economy would be pretty immediate."


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

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.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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author-avatar
Emma Duffy is Assistant Editor at Your Mortgage and  Your Investment Property Mag, which are part of the Savings Media Group. In this role, she manages a team of journalists and expert contributors committed to keeping readers informed about the latest home loan and finance news and trends, as well as providing in-depth property guides. She is also a finance journalist at Savings.com.au which she joined shortly after its launch in early 2019. Emma has a Bachelor in Journalism and has been published in several other publications and been featured on radio.

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