Sunday, 25 November 2007

New First Home Owners' Policy

The Australian Labor Party (ALP) swept to power in the Federal election last night, and it will be interesting to see if their housing and broadband policies manifest. I have a particular interest in both (both personally, and one professionally). I’ll focus on the housing policy in this post though.

It seems that owning a home in Australia is becoming more an more difficult. According to the Bureau Of Statistics:

  • The average home now costs seven times the average annual wage - up from four times the average annual wage just ten years ago;
  • Nationally, first home buyers are now spending 31.7 per cent of their total income on mortgage repayments – up from 17.9 per cent in 1996;
  • The proportion of homes being bought by first home owners declined from 21.8 percent in June 1996 to 17.1 percent today.

If you are buying your first home, you may be eligible for benefits under the First Home Owners Grant Scheme here in Australia. The Scheme was established to assist eligible first home buyers to purchase their first home by offering a $7000 grant.

The First Home Plus Scheme (which varies from state to state) also provides generous exemptions or concessions on transfer duty and mortgage duty for eligible first home buyers.

For example, if you buy a property valued up to $500,000 in NSW, 100% of the duty will be waived. If I was looking to buy a property with a purchase price of say $350,000, that’s a saving of $11,240 in duties.

Unfortunately these schemes have become been part of the reason housing prices have got so expensive, especially in major cities.

The ALP want to introduce an additional scheme called the First Home Saver Account.

Essentially, people will be allowed to make pre-tax contributions from their salary up to $50,000; which will be taxed at 15% and then invested in a superannuation style account. From what I've read on the flyer, couples will be allowed to combine their respective savings!

Deposits do have to be saved over a 4 year period (which may rule out some people, possibly even me), and of course while returns may be greater than an online savings account (plus the benefits of pretax investing); it is also possible returns could be lower too as with any investment.

I think this policy for first home owners is just stunning. It is such an incredible idea for promoting homeownership and getting people investing their money to benefit from management and compounding interest, without simply throwing money at people and artificially inflating home prices.

Anything to increase financial literacy in this country can only be a good thing. It will be interesting to see how it pans out.

Subscribe in a reader or Subscribe via email


  1. I think the policy for the home saver account sounds like a great idea, it is so much more difficult to save for a home deposit now that it was when we were doing it 30 years ago.

  2. I thought so too, not to mention it's a much better option than those 106% mortgages, they scare me.

  3. That's interesting. At first glance I thought you were talking about homeowner's insurance but I later read that it was a policy newly enacted. It sounds like it needs some tweaking. I hope it leads to better legislation.