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What Does the Budget Mean for Homebuyers

The 2018 Federal Budget is here, with many of the changes announced by Treasurer Scott Morrison set to affect Aussie home-owners. While millennials, renters, and prospective first-home buyers were largely ignored by the government, elderly home-owners will have a greater ability to access a reverse mortgage to unlock their home’s equity. While the lack of attention given to housing affordability has been criticised by many, new incentives for the elderly will help to unlock wealth for 1.8 million age pensioners.

With this Budget referred to as a "Santa" budget by more than one commentator, measures to tackle housing affordability were widely expected. This big issue was not mentioned once in the Treasurer’s Budget speech, however, with would-be home-owners only referenced indirectly through measures in the fine print. This was a surprise to many after the 2017 Budget, which included the First Home Super Savers scheme, the incentivisation of investment for affordable housing, and the removal of downsizing barriers in an effort to free up housing stock.

While young people from regional, rural, and remote communities did benefit from the relaxation of Youth Allowance eligibility criteria, millenials were mostly ignored when it came to housing affordability. Instead, the government chose to expand their pension loan scheme for elderly Australians, which allows pensioners to borrow against the value of their home and other assets without selling. This reverse mortgage scheme will allow age pensioners to convert some of their housing wealth into an income stream.

Every home-owner over the age of 65 will be able to access a reverse mortgage worth up to $11,799 per year for the rest of their lives. Originally a scheme for part-pensioners, it is not available to anyone over the retirement age. According to Grattan Institute figures, Australians between the age of 65 and 74 are $480,000 wealthier in real terms today than they were 12 years ago. However, because most of that money is tied up in real estate, it was difficult for most people to access. This scheme will improve the already-positive outlook for retirement-aged home-owners, with Australians over the age of 65 being the only group to see an increased rate of home ownership.

This reverse mortgage scheme may even be good for young people in the long run, by encouraging more elderly home owners to rely on their personal housing assets rather than public resources. There are dangers to this approach, however, with welfare schemes based around housing-assets only working if house prices remain high on a sustained basis. If house prices do fall, elderly home owners will be left with less housing equity to pass on to their children, money that is often used for first-home deposits.

There are some measures in the Budget that favour young property seekers, especially when it comes to increasing housing supply. The government will attempt to improve housing affordability by unlocking Commonwealth land owned by the Australian Communications and Media Authority in Queensland’s Redland City area. According to the Budget overview, up to 400 homes will be made available, with land supply also increased across the metropolitan Brisbane area. The government have also promised an extra $4.8 million over four years to the Australian Bureau of Statistics to construct better estimates of the stock of affordable housing.

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