The 2024-2025 Federal Budget was recently handed down. Inside, it painted a dire picture of our national housing crisis, attributing it to a “historic underinvestment” in housing, resulting in a substantial supply deficit. This shortage is a key factor in the housing affordability problems being experienced by first-home buyers across our great nation.
The Budget has also described a set of plans to help and improve this problem. However, they’re going to take some time to really make a difference to housing affordability.
The question is, what can first home buyers do now to get on the ladder?
In this article, let’s look at:
- Some of the facts listed in the 2024-2025 Federal Budget
- What the Government intends to do about home affordability issues, and
- Strategies first home buyers can implement to get your first “step” on the property ownership ladder.
Facts from the 2024-2025 Federal Budget
Here are some of the facts listed in the 2024-2025 Federal Budget about our housing market, and the affordability issues we’re experiencing:
- Low housing supply. Australia’s housing supply is notably low compared to international standards. With 420 dwellings per 1,000 people in 2022, Australia lags behind countries like Canada, the US, and the UK.
- Challenges in buying and renting. The shortage of housing has made it increasingly difficult to find properties for purchase or rent. The number of homes for sale has decreased since 2015, and rental vacancies have fallen below 1.5%, well under a ‘balanced’ market rate of 3%.
- Affordability pressures. The inability to build enough new housing to meet population needs has amplified affordability issues. Rapid population growth and changing housing preferences have driven up house prices and rents, with housing costs consuming a larger share of household incomes.
- Average income vs. house prices is widening. Median house prices have risen significantly, from 4.9 times the median gross disposable household income in 2002 to 8.6 times in 2024. The time needed to save for a deposit has also increased, contributing to declining homeownership rates and more people turning to long-term renting.
So, what is the Budget doing to make housing more accessible?
Since the 2022 election, the government has committed nearly $26 billion to address the housing problem, with an additional $6.2 billion allocated in the 2024-25 budget.
Key new commitments mentioned in this Budget include:
- An extra $1 billion to the Housing Support Program for infrastructure development.
- $1.9 billion to increase Commonwealth Rent Assistance rates by 10%.
- $88.8 million for 20,000 new fee-free TAFE places in construction-related courses.
- $1.9 billion in concessional loans for community housing providers.
- Lower foreign investment fees for Build to Rent developments.
- $423 million for the National Agreement on Social Housing and Homelessness.
These measures support the goal of building 1.2 million new homes over five years, starting from 1 July 2024.
What does this mean for first-home buyers?
In simple terms, the Federal budget is attempting to make property more affordable for everyone, including first-home buyers.
However, this won’t be strongly felt in the short term–because our market moves slowly, and it will take some time for these initiatives to take effect.
However, the most important thing to remember is that property will still be sold, bought, and built.
The question is, how can first-home buyers set themselves up for success as quickly as possible?
It all comes down to strategy and implementation. Let’s take a look at some strategies you can use:
- Adopt a ‘learning’ mindset: Stay informed about property market trends in your desired area. Look at recent sales data, attend open houses, and monitor property listings to understand price ranges and availability. Additionally, learn as much as you can about property, and how it can grow your wealth, how the property purchasing process works, and even negotiation skills. The more informed you feel, the more confident you’ll be.
- Understand your financial position: Determine how much you can afford to spend on a property by considering your savings, income, expenses, and existing debts. Speak with us if you’d like an accurate figure of how much you can borrow.
- Save for a deposit: Start saving for a deposit as early as possible. Aim for at least 20% of the property price to avoid paying Lenders Mortgage Insurance (LMI). Consider setting up a high-interest savings account or term deposit to grow your savings faster. Lenders like to see a regular savings history.
- Reduce debt: Pay down existing debts, such as credit card balances and personal loans. This will improve your credit score and increase your borrowing capacity. Lenders prefer borrowers with lower levels of debt and a history of timely repayments.
- Research government schemes: Take advantage of government incentives designed to help first-home buyers. These include the First Home Owner Grant (FHOG), stamp duty concessions, and the First Home Loan Deposit Scheme (FHLDS). Eligibility criteria and benefits vary by state and territory, so research what’s available in your area.
- Get pre-approval: Obtain pre-approval for a home loan from a lender. This shows sellers you are a serious buyer and gives you a clear idea of how much you can borrow. Pre-approval can also expedite the buying process once you find a property. Again, speak with us to learn more about pre-approval.
- Consider alternative buying options: If buying a traditional house is out of reach, explore other options such as apartments, townhouses, or properties in up-and-coming suburbs. You may also consider buying with a partner, friend, or family member to share costs.
- Find a team of experts who are vested in your success: Consult with an experienced mortgage broker (that’s us), financial advisor, and real estate agent. We’ll provide you with valuable insights and help you navigate the buying process.
Can we help you buy, even in our challenging housing market?
If you’re looking for an expert team (and a broker with premium status) to help with the purchase of your first home, request a Free 30-Minute Finance Strategy Session during which you will…
- Get a realistic understanding of your current situation… and how much you might be able to save via a refinance
- Get a better understanding of the lending options available to you
- Discover ways to save money on interest, fees, and charges that are specific to your unique situation
- Get an up-to-date picture of the lending landscape including rates, conditions, and how to structure loans
- Learn about our process to find you a loan that could save you thousands.
This no-obligation free session will be held with one of our experienced mortgage brokers. Please be assured this will not be a thinly disguised sales presentation. On the contrary, you’ll receive our best strategic advice, specific to your situation, so you too can accumulate multiple properties without sacrificing your current lifestyle and accelerate your progress towards wealth.
Schedule Your FREE 30-Minute Finance Strategy Session Today.
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Please note, the numbers and assumptions listed in this article are for educational purposes only. Individuals should seek specific advice pertaining to their unique situation and the real estate market before making any decisions.
Trilogy Funding Two is a corporate credit representative (Representative Number 506131) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237)
SOURCE: https://www.abc.net.au/news/2024-05-15/federal-budget-housing-crisis-in-10-graphs/103847336
About the Author
Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.
Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.
David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).