• Greg Morgan

Pros & Cons of the Homebuilder Grant

The Australian Government announced HomeBuilder in June in an effort to stimulate growth and keep construction jobs alive. The scheme is available for buyers of newly built houses or units, and also covers substantial renovations of at least $150,000. For people and projects that meet the strict criteria, there is $25,000 available as a cashback to help offset the cost of construction. While many people are set to benefit from the scheme, qualification and implementation challenges are proving a real headache for some.

At the start of June, Australian Prime Minister Scott Morrison announced the $25,000 HomeBuilder grant as a way to kickstart “a tradie-led recovery”. In order to be eligible for the grant, you must be an individual aged 18 years or older, an Australian citizen, and an owner-occupier. There are also income limits to test for eligibility, with individuals able to earn up to $125,000 in the 2018-19 financial year and couples able to earn up to $200,000. The construction plan itself also needs to meet strict criteria, both in terms of timing and value.

If you're thinking about getting your hands on some of this money, it's important to realise that it's not available forever. You can enter into a building contact until December 31, 2020, although construction itself doesn't have to start before this date. Eligible contracts include new homes valued up to $750,000, with a valid home needing to function as your principal place of residence. Large renovations are also covered, as long as your home is valued at less than $1.5 million before work starts and the renovation cost is between $150,000 and $750,000.

Early criticism leveled at the scheme focused on the large amounts of money that needed to be spent before the grant was made available. Not only did you need the funds to sign a minimum $150,000 contract, you also needed to abide by strict income limits that would practically guarantee years of debt. Since the announcement of the scheme back in June, a number of serious implementation issues have also risen to the surface, with key refinements made over time and different states coming on-board at different times.

According to Real Estate Buyers Agents Association president Cate Bakos, “Chasing the new build grant isn’t necessarily a great idea for every builder... Some borrowers may find themselves running out of time to claim the $25,000 benefit due to the strict rules around the entitlement.” New builds and off-the-plan constructions always come with challenges, with Cate highlighting the very real risks that often accompany "free" money: “They may find that they are holding a contract that sees them bound to complete the sale without the grant that propelled them to purchase in the first place.”

While building from scratch may seem enticing, even romantic to many, new affordable house and land packages often create lifestyle challenges due to their distance from the city and corresponding isolation from existing infrastructure and family concerns. Getting finance in the current economic climate is also a big hurdle, with major lenders found to be scrutinising bank statements and, in many cases, declining loans when there is evidence of early superannuation withdrawals.

HomeBuilder may not be for everyone, but according to Federal Housing Minister Michael Sukkar, the scheme is already doing great things. More than 37,000 Australians have registered their interest in the program so far, with “HomeBuilder proving to be the catalyst for first-home buyers and families to purchase a new home, or undertake a major rebuild, that they may have put off earlier in the year.” Industry analysts are partly in agreement, with AMP Capital senior economist Diana Mousina saying “It will help people who were already in the market, but I don’t know if it will actually encourage people to go into the new housing market.”

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