A new homebuyer fund launched by the Victorian government will offer up $500 million in a bid to help more of the state’s residents buy a home, amid ongoing debate around mechanisms directed at helping Australians buy in the current hot housing market.
The state’s Treasurer Tim Pallas has claimed the Victorian Homebuyers Fund (VHF) is expected to help about 3,000 residents buy a home.
The Victorian fund is an expansion of the $50 million HomesVic Shared Equity Initiative, which the government said helped more than 330 households into the market.
In practice, most recipients of the fund will need to have a 5% deposit, with the government chipping in up to 25% on top.
Additionally the Victorian government will keep a stake in the home until the property is sold or the owner buys out its share.
Recipients do not need to be first home buyers, but cannot currently own a property. They will also need to be able to demonstrate they could put together a deposit, and banks will assess credit scores and capacity to meet mortgage repayments.
“They’ll be able to buy homes with the help of the Victorian government, which will be an equity partner in the purchase,” Pallas said.
Recipients of the funding can then either buy out the state’s share in the home or give the same proportion of the value back when they sell.
“We will put that money back into the fund, so this will become self-sustaining in all likelihood, given the continuing and historical appreciation and value of assets over time,” Pallas said.
Opportunities in a competitive market
The new initiative out of Victoria follows action taken by other states to create levers to help more first home buyers get into Australia’s runaway property market, including a proposal in June to overhaul NSW’s property tax that included a $25,000 grant that would replace existing stamp duty concessions for first home buyers.
A progress paper that accompanied the proposal suggested that while the reform wouldn’t push down house prices, it said the lower upfront costs had the potential to benefit first home buyers.
Other federal schemes that create pathways for first home buyers — in the absence of action to meaningfully lower property prices — include the national First Home Owner Grant (FHOG) which offers a one-off payment to eligible buyers, and the First Home Loan Deposit Scheme (FHLDS), which allows first home buyers to buy property with a deposit of 5%.
In late September leaders at several of Australia’s big banks renewed calls for the regulator to take steps to cool Australia’s hot property market.
Commonwealth Bank CEO Matt Comyn urged regulators to act “sooner rather than later” at the same time as the Reserve Bank of Australia (RBA) warned that sky-high property prices and growing household debt could threaten Australia’s financial stability.
Residential property prices in the June quarter across Australia rose by nearly 7%, following months of astronomic growth that have resulted in the median price of a house in Sydney reaching $1.19 million, and Melbourne hitting $895,000.
However the state’s Liberal opposition pushed back against the effectiveness of the homebuyer fund.
Shadow Treasurer David Davis said in a statement the program would only further contribute to the housing affordability crisis because hikes in stamp duty and land tax will stymie the impact of the fund.
“These programs are part of their approach to give with one hand and take away with the other,” Davis said.
“The massive taxes on new homes have been jacked up to pay for Labor’s mismanagement of infrastructure projects and their cost blowouts,” he said.
Real Estate Institute of Victoria (REIV) said it welcomed the additional support that would assist “more Victorians to enter and remain in the property market.”
“The Victorian Homebuyer Fund seems to be a sensible policy that will be particularly helpful to [first-time] entrants in the property market,'” it said.
The Victorian Treasurer denied the scheme would further push up house prices, which economists warn can be caused by tax breaks and incentives for homeowners.
“It’s not something that will effectively augment the price,” he said.
“We’re not putting more money into people’s pockets … we’re giving them the opportunity to participate in a competitive market.”