Help to Buy

Help to Buy launched on 5 December, promising to make home ownership more achievable for thousands of Australians. With lower deposit requirements and government support, it could be a game-changer for some buyers. But is it the silver bullet? Let’s explore the details.

What is Help to Buy?

The government’s shared equity scheme, Help to Buy, aims to ease the path to home ownership by reducing upfront costs. Under the scheme, the government will contribute up to 40% of the purchase price for new homes and 30% for existing homes. This means buyers need a smaller deposit and can borrow less, making the dream of owning a home feel closer than ever.

Eligibility and Key Details

To qualify, applicants must meet these criteria:

• Up to 40% equity for new homes, 30% for existing homes.

• Income caps: $100,000 for individuals and $160,000 for couples or single parents.

• Deposit: as little as 2%, compared to the usual 20%.

This is designed for low- and middle-income earners, including essential workers and families who have struggled to save a large deposit.

Property Price Caps

Property price caps vary by state to reflect local markets:

• NSW: $1.3M in cities, $800K regional.

• VIC: $950K in cities, $650K regional.

• QLD: $1M in cities, $700K regional.

Other states have similar limits. These caps aim to keep homes within reach, though in high-demand areas, affordability may still be a challenge.

This Scheme Suits Regional Areas

Here’s the reality: most capital city property prices are well above the borrowing capacity for applicants under this scheme. Even with the government’s contribution, couples earning $160K would struggle to afford homes near the $1M mark without significant extra funds.

This makes Help to Buy far more suitable for regional areas, where property prices are lower and the scheme’s benefits can truly make a difference.

Professions commonly earning below the salary cap in regional areas include essential service workers and community support roles, such as those in education, healthcare, public safety, administration, and hospitality. These employment groups stand to benefit most from the scheme.

How Does Repayment Work?

 Once you buy through Help to Buy, you’ll co-own the property with the government. Over time, you can increase your share by:

• Making regular repayments to boost equity.

• Buying back some or all of the government’s share using extra funds or loans.

• Selling the property, at which point the government’s share is repaid.

Important: When you sell, you must repay the government’s share based on the current market value, not the original purchase price.

This means if your property has appreciated, the government’s portion will also increase, reducing your profit. For example, if the government owns 30% and your home rises from $600,000 to $700,000, you’ll owe $210,000 instead of $180,000.

While this ensures fairness for taxpayers, it can limit the equity gains you hoped for.

Our Expert Opinion

Our view: Help to Buy may help some, but it’s not without limitations.

• A 2% deposit sounds appealing, but income caps will restrict eligibility.

• Borrowing capacity plus 2% savings may still fall short for many buyers.

• Price caps align with current schemes, but couples earning $160K would need significant extra funds for higher-priced properties.

• There are only 10,000 spots per year for four years – demand may exceed supply.

• Initially this is available only via CBA and Bank Australia; lender participation may remain limited.

• Co-ownership means sharing future gains – a factor many buyers overlook.

Should You Consider It?

 While Help to Buy appears attractive, it’s important to understand the potential drawbacks.

If saving for a deposit has been your biggest challenge, this scheme could provide the opportunity to enter the market sooner. However, strict income and property caps, combined with the requirement to repay the government’s share at current market value, mean it may not suit everyone.

In many cases, the disadvantages could outweigh the benefits if not approached strategically.

Speak to Your Lending Experts for tailored advice and ensure you explore all your options before making a decision.

Printable PDF

---

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.