Market update – The HomeBuilder stimulus – What it means for home buyers, renovators, jobs, the economy and property market! (Ep.51)

The Property Planner, Buyer and Professor met for a ‘breaking news’ recording on the $688 million HomeBuilder stimulus package announced by the federal government yesterday. The new package aims to safeguard the jobs of a million tradies, to prop up the construction industry which was teetering on the edge of oblivion.  

Home owners, first home buyers and renovators will be offered a cash grant of $25,000 for building contracts and purchase of new dwellings signed from 4 June 2020 right through to 31 December 2020. Hear the full story as David Johnston, Cate Bakos and Peter Koulizos take you through: 

In this episode David Johnston, Cate Bakos and Peter Koulizos take you through: 

  1. Setting the scene – why this package was initiated by the federal government. Supporting over one million employees, around 9% of all employees in the country, working in the construction industry, which provides an estimated $100 billion and a whopping 5 per cent of our economic output each year. 
  2. How home building in Australia was collapsing prior to Covid-19 after four boom years to 2017-18, when the industry started around 225,000 homes a year. Starts have since fallen to around 165,000 this financial year due to a cascading set of events from the tightening of finance by APRA, The Banking Royal Commission and the exit of investors, particularly from offshore, and the consequent inability to finance apartment projects. 
  3. Unpacking the In’s and Out’s of the scheme, who can take advantage and the criteria for grant approval, how, where, when and why. 
  4. Discuss why the package is well balanced, whilst also dissecting some potential weaknesses.   
  5. How state government has said it will play a role in speeding up council approvals if needed, which must be obtained prior to signing the build contract.  
  6. Why regional areas and first-time buyers may be the big winners due to the lower value entry points, and the state-based grants and stamp duty benefits already on offer. A close second could be those who were about to embark on a major home renovation. 
  7. The impact this could have on the established property market. We could see a resurgence in home buyers wanting to buy a doer upper home. To do this within the almost 7-month time frame is no mean feat.  
  8. How the economic effects of the stimulus will flow through the broader economy and property market on a macro-economic level and this will mostly be a good news story.  
  9. Why Australia continues to build on its international reputation as a safe haven for the flow of overseas investment and capital which is vital to our economic prosperity as a capital importing nation. This has been reflected in the international willingness to purchase our government bonds, the Aussie dollar and ASX share market. The latter two of which hit 5 month and 3 month-high’s respectively this week.  
  10. And of course, our “gold nuggets”! 

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Show notes

  • Breaking news! The government has announced a HomeBuilder stimulus of $688 million 
    • New HomeBuilder package aims to safeguard jobs of a million tradies. 
    • $25,000 cash grant to home owners and first home buyers to build or purchase a new dwelling as a principal place of residence. For those building a new home, the value of the build plus the land cannot exceed $750,000.   
    • $25,000 for substantially renovating a home which is a principal place of residence. The renovations must be valued between $150,000 to $750,000, with the home not valued more than $1.5M prior to the renovation.   
    • To qualify, your income for singles need to be below $125,000 or couples under $200,000 in the last financial year.  
    • The package will be offered from June 4 to December 31 this year for building contracts entered into during that period. 
    • The grant cannot be used for additions to the property that are unconnected to the dwelling, such as swimming pools, tennis courts, outdoor spas and saunas, sheds or garages.  
  • Setting the scene why this package was initiated by the federal government supporting over one million employees, around 9% of all employees in the country, working in the construction industry, which provides an estimated $100 billion and a whopping 5 per cent of our economic output each year. 
  • Regional areas – you can double dip, if you are eligible in Vic for the first home owners grant, $20,000 in regional areas – you will get this grant plus the $25,000 HomeBuilder grant. Plus Vic no stamp duty for purchases under $600,000.  
  • Can you spread it across multiple contracts? This is not clear yet. For renovations, you may be dealing with multiple suppliers, individual tradies, rather than 1 builder.  individual tradies, that saved us $30,000-$50,000. It might be harder to pull the pieces together and claim that $25,000. 
  • 6 month window – move quickly! 
    • Council approvals – you need to get this through before signing the build contract.  
    • House and land packages, the product is off the shelf and ready to go.  
    • People who already had this underway.  
  • Is the $150,000 minimum for renovations too high? $150,000 is not a small renovation. They want to get builders out there and working, and are targeting significant building jobs and new housing. Older style properties, $150,000 is not a big spend. We would like to see it have been $75,000 or even $50,000, which will allow people to move a bit faster. 
  • Will people rush to buy property for the purpose of renovating? To do this within the 6 month time frame is no mean feat – you need to get your preapproval, locate a property, purchase, get your plans in order, find a builder and sign a contract.  
  • Council approvals, the stumbling block – Planning minister to take action against local council’s to push through permits if they are dragging their feet.  
  • Why is this important? Construction industry is 10% of the work force, this is a significant number. It’s third in line behind healthcare and retail. 1 million employees – it’s about employing these people and increasing sentiment out there. One of the largest contingents on JobKeeper and JobSeeker payments are builders who are not employed. You are not only helping a significant amount of the work force, you are also helping people with one of the most significant purchases in their life.  
  • Flowing through the economy – maintaining the momentum of the economy through this period. The stimulus gets stamp duty to governments, rates to councils, real estate agents, buyers agents, mortgage brokers, lenders, all the different parties, retail for purchases to put inside home.  
    • We didn’t think the property market would fall, maybe maximum 5% – the average capital city reduction was 0.4% – massive rebound in retail spending. The government will probably turn off the tap on some parts of JobKeeper and JobSeeker as needed and be more targeted.  
    • Nothing which needs to be implemented immediately will be perfect, but we have navigated this very well.  
    • We’ve squashed the curve so well and the institutions like government, banks and RBA have been so impressive, that we are becoming a beacon in the global community once more, like after the GFC.  
    • There are a number of countries talking with us about creating travel bubbles, asking us to be on their list. 
    • Australian $ is at a five-month high after significant falls and stock market is at a three-month high as well. Australia is being seen as a safe haven. 
    • Australian made materials – not only helping tradies but also helping manufacturing industry, a lot of materials coming from overseas have been shut down. 
  • Immigration – the elephant in the room – it is a significant undercurrent for us. WE have relied on population growth and it has carried us economically. This will take a significant toll on our prosperity and recovery in the short to medium term. We think they should be able to find a solution to that or an approach to allow immigration. The demand for people wanting to move to Australia is only going to get greater. 

David Johnston – The Property Planner’s Golden nugget: if you’re buying a stepping stone home, you want to still be buying within the area you ultimately want to be living in. If you short cut that and maybe move into the outer rings, it might be harder to get back into the middle or inner rings. So be conscious of the location being around where you want to live long-term. 

Cate Bakos – The Property Buyer’s Golden nugget: anyone who is thinking of buying established home and quickly settling and doing renovation, be mindful you have to spend $150,000 on a renovation and you may be funding that, but what you always have to think about, is are you being mindful of your future plans. Because even if you can take advantage and pull this off, if it’s not in your plan and it negatively impacts your future plans, you need to think twice.  

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