Prime Minister Anthony Albanese's plan for the government to buy a 40 percent stake in the homes of first-time homebuyers could backfire, real estate experts fear (he is pictured outside his Marrickville home with girlfriend Jodie Haydon)

How can first home buyers LOSE money if they buy a home under Labour’s 40 percent plan?

Prime Minister Anthony AlbanianThe government’s plan to buy a 40 percent stake in the properties of first-time homebuyers could backfire, real estate experts fear.

Labor’s Help to Buy scheme helps individuals who earn up to $90,000 and mate with a combined income of $120,000.

From July 2022, real estate newcomers can register for one of the 10,000 places.

This would mean that the government will buy 40 percent of a new home and 30 percent of an existing home if a first-time home buyer has a down payment of at least two percent.

But CoreLogic’s research director, Tim Lawless, said the plan was risky, as the major banks predicted a decline in home prices on the back of rising interest rates.

Prime Minister Anthony Albanese’s plan for the government to buy a 40 percent stake in the homes of first-time homebuyers could backfire, real estate experts fear (he is pictured outside his Marrickville home with girlfriend Jodie Haydon)

“With the housing market likely to spiral downward in the coming years, some buyers may find that their home is worth less than the debt on it,” he said.

“It’s important to know whether the government will share in the downside risk if the property is sold when equity is negative.”

The Reserve Bank of Australia admitted in April that raising the spot rate to two percent would likely lead to a 15 percent drop in property prices before raising interest rates in early May, less than three weeks before the election.

Westpac, Australia’s second largest bank, expects Sydney property prices to fall 14 percent over the next two years and Melbourne’s value to fall 15 percent.

In an effort to curb rising inflation, the RBA raised the spot interest rate by a quarter of a percentage point to 0.35 percent on May 3, ending the record-breaking 0.1 percent.

The pundits expect another hike in June, with Westpac chief economist Bill Evans forecasting a 0.4 percentage point increase next month, followed by another six hikes by May 2023 — pushing the spot rate at 2 for the first time in eight years. 25 percent come.

Inflation in the year to March rose to 5.1 percent, its fastest pace in 21 years and well above the RBA’s 2 to 3 percent target.

Speaking of a rate hike, property prices in Sydney and Melbourne fell in April for the first time since mid-to-late 2020, before the RBA cut spot interest rates to historic lows.

Labor's Help to Buy scheme helps individuals who earn up to $90,000 and mate with a combined income of $120,000.  From July 2022, new real estate entrants will be able to apply for one of 10,000 places (shown are Sydney suburban homes)

Labor’s Help to Buy scheme helps individuals who earn up to $90,000 and mate with a combined income of $120,000. From July 2022, new real estate entrants will be able to apply for one of 10,000 places (shown are Sydney suburban homes)

Help to buy thresholds

SYDNEY: $950,000

MELBOURNE: $850,000

BRISBANE: $650,000

PERTH, ADELAIDE, HOBART, DARWIN: $550,000

The new Labor government’s scheme has been capped at $950,000 in Sydney, Newcastle and Wollongong, and CoreLogic calculates it would help buyers in 26.8 percent of suburbs.

That means a first home buyer would be eligible for a typical home in Cabramatta West, where the median price is $900,658 — a level well below the larger Sydney median of $1,417 million.

Melbourne and Geelong are capped at $850,000, which CoreLogic calculated would benefit first-time homebuyers in 31.3 percent of suburbs.

This would help someone looking for a home in Altona Meadows in western Melbourne, where the median price is $799,751 – a level more affordable than the Melbourne average of $1,001 million.

Brisbane, the Gold Coast and the Sunshine Coast are capped at $650,000, with the program expected to help buyers in 21 percent of suburbs.

Strathpine in Brisbane’s north has an average home price of $607,138 – a level well below the city’s $880,332 average.

A $550,000 limit applies in Perth, Adelaide, Hobart and Darwin, along with regional Victoria and the Northern Territory.

Canberra has a $600,000 cap that CoreLogic expected would help buyers in just 1.2 percent of the suburbs in a city with an average home price of $1,070 million.

Labor also went into the election with the Regional First Home Buyer Support Scheme, which also has 10,000 spots, but from January 2023 for those with a five percent down payment.  There is an $800,000 threshold in Newcastle (pictured is Belmont at the mouth of Lake Macquarie)

Labor also went into the election with the Regional First Home Buyer Support Scheme, which also has 10,000 spots, but from January 2023 for those with a five percent down payment. There is an $800,000 threshold in Newcastle (pictured is Belmont at the mouth of Lake Macquarie)

Labor also went into the election with the Regional First Home Buyer Support Scheme, which also has 10,000 spots, but from January 2023 for those with a five percent down payment.

It has more generous income thresholds of $125,000 for singles and $200,000 for couples, although homes in regional areas are more affordable.

Applicants must have lived in a region for a minimum of one year.

The thresholds range from $800,000 on the NSW Central Coast, Illawarra and Newcastle, to $700,000 in Geelong, $600,000 on the Gold Coast and Sunshine Coast and regional areas of NSW outside major centers, $400,000 in regional Western Australia and Tasmania, $500,000 in the Northern Territory and regional Victoria outside major centers, and $350,000 in regional South Australia.

Labor opposed former Liberal Prime Minister Scott Morrison’s plan to take first-time homebuyers up to $50,000, or 40 percent of their pension.

But it supported the Coalition’s Home Guarantee Scheme, under which first-time homebuyers would be allowed to enter the real estate market with a five percent down payment, while taxpayers would take the rest of the usual 20 percent down payment.

The old First Home Loan Deposit Scheme under the previous coalition government had zero defaults and Mr Lawless said the risk was likely to be low under the Labor programme.

Westpac predicts huge declines

SYDNEY: 2022 (- 3 percent); 2023 (- 9 percent); 2024 (- 2 percent)

MELBOURNE: 2022 (- 3 percent); 2023 (- 9 percent); 2024 (- 3 percent)

ADELAIDE: 2022 (+ 3 percent); 2023 ( – 4 percent); 2024 (+ 1 percent)

BRISBANE: 2022 (+4 percent); 2023 (- 4 percent); 2024 (+ 1 percent)

PERTH: 2022 (flat); 2023 (- 6 percent); 2024 (+ 1 percent)

HOBART: 2022 (- 2 percent); 2023 (- 6 percent); 2024 (- 2 percent)

AUSTRALIA: 2022 (- 2 percent); 2023 (- 8 percent); 2024 (- 1 percent)

Source: Westpac

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