Levy:
There is some good news for first home buyers. From today, the Government’s first home loan buyers scheme will be rolled out. The Scheme allows first home buyers on low and middle incomes to buy a house with a deposit of as little as five per cent. Now there is a catch, the Government will support up to 10,000 loans each financial year, based on a first in, best dressed basis. It is supposed to help tackle housing affordability, but we are also hearing today that housing prices are on the way up again. Michael Sukkar is the Federal Housing Minister, and I am pleased to say he joins me on the line, Minister good morning and happy new year
Minister Sukkar:
Happy New Year, thanks for having me.
Levy:
Not a problem in the world, look I have just been through the process of buying a house and I understand how difficult it is for people and to be honest, I understand the pressures for younger people that are trying to get their foot into the housing market. Can you just firstly explain how the first home loan buyers scheme will work in a bit more detail for us?
Minister Sukkar:
Yeah of course Mark, in essence what this Scheme will allow is for first home buyers to purchase a property with a five per cent deposit. It enables first home buyers to do that because the Government will guarantee the difference between five per cent and up to 20 per cent. As we know, banks are requiring a 20 per cent deposit. For someone purchasing an average property, average priced property in Sydney, it is taking sometimes over 10 years to save that deposit, so by the Government guaranteeing up to 15 per cent of the loan they are able to access this finance years more quickly, and therefore can purchase a deposit with as little as five per cent. They don’t come to the Government, there are a range of lenders who are participating in the Scheme. At the moment there is lenders who are offering guarantees under the First Home Loan Deposit Scheme are the Commonwealth Bank and NAB. They are the two lenders in January that are offering the Scheme and then from 1 February, we have got about another 25 small lenders, Bendigo Bank and a whole lot small lenders getting on board too. So first home buyers should go to those banks, NAB or CBA, and work out whether they are eligible and get the process started.
Levy:
I think our population now Minister is up over 24 million people, why just 10,000, admittedly the 24 million, a whole range of generations, why just the 10,000 loans that have been made available by the Government?
Minister Sukkar:
Well these are 10,000 every year Mark, so this is a Scheme that will offer these each financial year – 10,000. We are going to see how the Scheme goes, we’d expect the Scheme to be pretty popular, but like all of these things you have got to suck it and see to a certain extent. We will be watching this very closely over the coming months, how the Scheme goes, what the take up is like. There are income caps, so for example, this applies to an individual with an income of $125,000 or less, or a couple of $200,000 or less, and of course there are house price caps. So for example in the capital city of Sydney, in Newcastle, Lake Macquarie and the Illawarra the cap is $700,000, and for the rest of state, the regional and rural areas its $450,000. So these are targeted at people who are trying to purchase a modest first home, and we think at this point in time 10,000 will make a serious dent in helping first home buyers get into the market, but we will keep a close eye on it to see how it’s going and how popular the Scheme is.
Levy:
It all starts today, have you had any feedback from the banks to suggest that people are already taking it up, because I’m assuming the 10,000 is going to go quickly if it’s a first in, best dressed basis?
Minister Sukkar:
Well the advice I have received from the NAB and CBA to date has been that there has been a lot of buyer interest in the lead up – a lot of people booking in appointments for today and for the rest of this week. So it’s still only a few hours in, we will get a good sense I suspect within a week or so, how it’s tracking. It is not surprising that there would be a lot of pent up interest shall we say, that’s been building up over the last month or so since the Scheme has been well understood by people. So I think early signs are Mark, that it is pretty popular but we won’t get a really good sense of how many of those are just, sort of, popular interest compared to actually converting them into first home purchases for at least another couple of weeks I would have thought.
Levy:
Minister, I mentioned I have been through the process myself, I have got an investment property in Brisbane, I have just bought my first house in Sydney and you obviously sit down and do your sums and you have a look at some of the money you are spending on a whole range of things from stamp duty to legal fees, to all those sorts of things, would you concede that the amount of money that is spent, firstly on the property, but secondly on all the other associated costs is just extraordinary and a lot of people are taken by surprise when they sit down and crunch the numbers and look at things like stamp duty?
Minister Sukkar:
Mark, I would more than concede, I would enthusiastically support your assessment…
Levy:
So what can we do about it?
Minister Sukkar:
One of the things I talk a lot about is that in the housing affordability space, what we can’t do is ignore the fact, depending on which measures you look at up to 43-44 per cent of the cost of a new property is built up in regulatory costs – taxes, stamp duty and others. Now most of those are levied by state governments. What I try to avoid Mark is looking like the Federal Housing Minister gratuitously having a crack at the states, but if you look at your home town the local council developer charges, plus taxes and stamp duties all add up and in the end get passed on to the consumer, that’s in the end who pays for it. There are a number of things we are trying to encourage our state counterparts to think about as far as bringing down those costs. Probably the best thing we can do for affordability, well not probably quite certainly, the best thing we could do for affordability is to get more supply into the market. Because as you know, you have spoken about population, in a growing population, if you don’t have the housing stock to keep up with it, it does one inevitable thing to prices, and again, one of my criticisms throughout the country is its very, very hard to get new housing stock, whether they be apartments, townhouses, new free standing homes in developments, very hard to get them out of the ground. Very hard to get the approvals, very expensive and the costs get passed on to the end consumer as you have experienced yourself very recently.
Levy:
I think Minister though the frustration out there at the moment is the fact that we have so many foreign investors coming to Australia and saying, ‘oh well we have got the money we can do it’. We should be looking after every day Australians to make it affordable for them to buy. I think the 10,000 loans is a start, but you talk about house prices, I was interested to read today that new research from CoreLogic predicts house prices to rise significantly, in fact, they are saying that Sydney’s median house price will surpass $1 million next month. So even with the Scheme it seems housing will remain out of reach for a lot of people here in Australia that are desperately wanting to have a crack?
Minister Sukkar:
Well again this is why the most significant way you can move the dial on prices is to get more supply into the market. You know if you pump up supply, you get more supply into the market, it stabilises prices and you don’t see these runaway prices which we have seen really of the last decade or so. One of the major reasons for that has been, yes we have a growing population, but we have got state governments and territory governments unable to maintain the new supply of housing to just keep our head above water and what that essentially does it push up prices
Levy:
But the counter argument there Minister is that for any of my listeners, especially in Sydney that drive around the streets, you constantly see construction, high rise apartment buildings, you are seeing all these, you know we are talking about supply, for the everyday Australian driving around the streets, they keep seeing these buildings going up left, right and centre but it’s the foreign investors who are buying the properties, that’s the problem, surely?
Minister Sukkar:
We made some very significant changes back in 2015 that essentially cracked down on foreign investment, so we don’t allow foreign investment in into established residential property in Australia. Now those rules were not being enforced, we now have a dedicated unit within the ATO who basically scrutinises all these purchases. So that means you can’t be a foreign resident purchasing an established residential property. What we do encourage, or what we do allow is for foreign investors to purchase off the plan apartments, because quite often, and if you talk to people in the development industry in Sydney, but in all of our major capital cities, you can’t get projects off the ground unless you have got really significant pre-sales, it might be 50 per cent, it might be 75 per cent, in some cases it might be over 90 per cent.
Levy:
But you see that’s the problem, they’re the off the plan apartment buildings that are going up, which is very easy to say at one point that we are stopping the foreign investors but then we are saying you can buy them off the plan, but everywhere you drive around Sydney you’re seeing these buildings going up, apartment buildings everywhere, which are being bought off the plan, so I think that’s sort of where I am coming from, but you know what at the end of the day…
Minister Sukkar:
Fair enough, just finally, we made an additional change to say that you couldn’t have in any development, more than half of the development had to be available for Australian residents. We made those changes in 2015, we hope that is going to make a bit of a difference, but time will tell.
Levy:
Alright Minister, well, I reckon there is a lot of people out there listening this morning thinking to themselves you little ripper, 10,000 loans, first in, best dressed – I better be quick, they will be picking up the phone right now, thanks so much for your time, Happy New Year, you have a busy year ahead of you no doubt.
Minister Sukkar:
Thanks for having me Mark, take care.