2022 mid-year wrap up

A new Federal Government – more help for first home buyers

The Federal election is done and dusted with a Labor government now at the helm in Canberra.

Though it’s early days yet, the Albanese Labor Government has pledged to help more people buy a home sooner by cutting the cost of home buying by up to 40%¹.

The proposed Help to Buy scheme will be open to 10,000 Australians each year. It’s essentially a shared equity scheme where eligible home buyers will need a minimum deposit of 2%, with an equity contribution from the Federal Government of up to 40% of the purchase price of a new home, and up to 30% of the purchase price of an existing home.

While Help to Buy has been announced it has not yet been launched.

Meanwhile in NSW, the latest State Budget² has announced $780.4 million to help single parents, older singles and key workers buy a home through a shared equity scheme. The two-year pilot program will offer 3,000 places a year.

In addition, $728.6 million has been earmarked over four years by the NSW State Government to give first home buyers purchasing a home for up to $1.5 million the option to pay an annual property tax instead of up-front stamp duty.

Inflation and interest rates – the big story of 2022

Like many nations, Australia is experiencing its highest rate of inflation for many years³.

In a recent speech, Reserve Bank of Australia (RBA) Governor, Philip Lowe⁴, made it clear that interest rate rises are targeted at scaling back inflation from its current level of 5.1% to the RBA’s preferred range of 2-3%.

Lowe also noted that despite rate hikes in both May and June, more rate increases could be on the way.

However, research by Mortgage Choice confirms many Australians are ill-prepared for rising home loan interest rates, with one in three borrowers admitting to losing sleep at night over rising rates⁵.

On the flipside, over 60% of borrowers surveyed by Mortgage Choice identified refinancing as a “hassle I’d like to avoid” and 61% said they are “cautious about refinancing in case I end up worse off”⁶. 

With interest rates expected to rise further in 2022, it’s important to have a chat with your broker about reviewing your current home loan. Many borrowers save hundreds or even thousands of dollars a year by switching⁷.

Of course, the silver lining to the cloud of rising interest rates is that many savings accounts are now delivering higher rates, which is good news for first home buyers saving a deposit.

The property market

How things can change in the space of 12 months! Last year, strong demand, low supply and low interest rates combined to drive the fastest pace of property price growth in more than three decades⁸.  

A recent PropTrack report explains that last year, sellers overwhelmingly had the upper hand. But this picture has shifted as the housing market has slowed. Now buyers are regaining the upper hand in negotiations, with vendors having to rein-in price expectations.

PropTrack Senior Economist Eleanor Creagh says properties are staying on the market for longer, with buyers now having more choice and less pressure to move quickly.

So, are we moving from a seller’s market to a buyer’s market?

Ms Creagh notes that Sydney and Melbourne could fast be approaching buyers’ market territory. While sellers still hold the upper hand in the smaller capitals, the pendulum may start to swing in buyers’ favour later in 2022.

As mortgage rates have moved higher, some buyers may no longer be able to borrow the same amount as this time last year⁹. This makes it critical to stay in touch with your Mortgage Choice broker to understand how your borrowing power may be impacted by rising rates.

Property investors in ATO’s sights

If you own a rental property, it’s worth taking extra care with your end of financial year tax planning.

The Australian Tax Office (ATO) suggests making sure you include all the income you’ve received from your rental property in your tax return, including short-term (AirBNB-type) rental arrangements, insurance payouts and any rental bond money you retain.

ATO Assistant Commissioner Tim Loh¹⁰, says, “We know a lot of rental property owners use a registered tax agent to help with their tax affairs. I encourage you to keep good records, as all rental income and deductions need to be entered manually, you can ask your registered tax agent for assistance.

“If we do notice a discrepancy it may delay the processing of your refund as we may contact you or your registered tax agent to correct your return. We can also ask for supporting documentation for any claim that you make after your notice of assessment issues” adds Mr Loh.