The 2021/22 Federal Budget focuses largely on recovery, to plug remaining gaps in the Australian economy.
The 2021 budget is here. It’s the second budget in just six months, following last year’s delayed COVID budget. It has a range of steps to support first-home buyers (FHBs), single-parent families and retirees.
Here’s what Federal Treasurer Josh Frydenberg announced in handing down a big-spending 2021 Federal Budget.
Family Home Guarantee for 10,000 single parents
The government will introduce a new Family Home Guarantee from 1 July 2021 to support 10,000 eligible single parents with dependants by acting as a guarantor.
“The Family Home Guarantee is based on the successful First Home Loan Deposit Scheme and New Home Guarantee, which are helping more than 26,000 first-home buyers enter the housing market sooner,” the government said.
Whether you’re a first-home buyer or you already own a home, you may be able to build a new home or buy an existing one with a deposit of 2% without having to pay Lenders Mortgage Insurance (LMI).
New Home Guarantee expanded for a second year
The FHLDS (New Homes), also called the New Home Guarantee, will be expanded by a further 10,000 places. This will help first-home buyers buy a home or build a new one with a 5% deposit.
Maximum First Home Super Saver Scheme contributions will increase to $50,000
Earlier, you could contribute a maximum of $30,000 over two years voluntarily to save for a deposit.
From 1 July 2022, The government will increase the amount to $50,000 to help first-home buyers move into their dream home sooner.
Extending access to the downsizer scheme
From 1 July 2022, the downsizer scheme will offer Australians over 60 the opportunity to sell their home and downsize before putting that money into their superannuation. They’ll be able to contribute up to $300,000 ($600,000 per couple) into their superannuation if they downsize their home.
This particularly targets Australians who are asset rich and cash poor. They often live in tightly held areas and freeing up property in such places can help families and FHBs.
HomeBuilder program extended
Source: Budget overview | 2021-22 Budget
According to Frydenberg, HomeBuilder came to the rescue when construction work began to dry up.
The HomeBuilder program has been a success by helping home buyers begin residential construction activity. More than 120,000 Australians have applied for the grant, which is four times more than what was expected.
For existing applicants to the scheme, the amount of time to commence construction will now be 18 months from the date the eligible contract was signed, instead of six.
The government plans to support household income and generate more jobs with income-tax cuts.
- Last year’s $1,080 low- and middle-income tax relief to extend for another year
- The extension is worth up to $1,080 for individuals and $2,160 for couples
- $7.8 billion to support more than 10 million low- and middle-income earners
More affordable child care
Effective from 1 July 2022:
- The government to provide $1.7 billion over five years towards Child Care Subsidy
- Child Care Subsidy to increase by 30% to a maximum of 95% for the second and subsequent children
- A $10,560 cap on the Child Care Subsidy to be removed, benefitting around 18,000 families.
The Treasurer expects higher workforce participation and women’s economic security through these decisions.
So there was an extension of the support for FHBs in the 2021 budget, but the question remains whether it will be enough, given Australia’s steadily rising property prices.
Experts suspect a price drop in 2022 and RBA rate hikes
Australia’s big four banks had forecasted that house prices would rise 10% or more this year.
|House price predictions||17% rise||10% rise||More than 10% rise||10% rise|
However, experts are already predicting one of the budget outcomes will be a reduction in the time before the next RBA hike due to the boosted economy and labour figures.
More stimulus from the federal government would mean a boost in home-buying confidence. Strong activity in the housing market might drive the banking regulator to step in with measures to cool the sector.
Although the Reserve Bank of Australia (RBA) has assured it will hold the cash rate until the end of 2022, this could force the central bank to come forward with its rate hike plans.
How can you make the most of the 2021 budget?
With the budget focusing on recovery, Australians who weren’t able to get ahead of the property market boom might have a chance now.
The introduction of the Family Home Guarantee and the extension of existing programs, like HomeBuilder and FHLDS (New Homes), will help first-home buyers achieve their dreams of homeownership sooner.
Similarly, tax relief for low- and middle-income earners means better affordability for home loans.
Speak with one of Home Loan Experts’ mortgage brokers to discuss your situation and make the most out of the budget. Please call us on 1300 889 743 or fill in our free assessment form.