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Can lawyers benefit from Labor’s new housing policy?
The new Albanese government is proposing a provision of equity contributions of up to 40 per cent of the purchase price of new homes. Here, we explore what it might mean for lawyers looking to buy.
Jerome Doraisamy
In the lead-up to the recent federal election, the Labor Party unveiled its Help to Buy scheme, open to 10,000 Australians per annum, under which eligible home buyers, with a minimum deposit of 2 per cent, can access an equity contribution from the federal government of up to 40 per cent of the purchase price of a new home and up to 30 per cent of the purchase price for an existing home.
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“We have a housing crisis in Australia. It’s harder to buy a home today than ever before. Forty years ago, almost 60 per cent of young Australians on low and modest incomes owned their own home. Now, it is only 28 per cent,” Labor espoused at the time.
“There is no silver bullet to fix this problem, but a government that actually plans for the future can help Australians realise their dream.”
Similar schemes, the now-government proclaimed, are “already successfully operating” in several Australian states, including Victoria and Western Australia.
Home buyers will not have to pay rent on the stake of the home held by the federal government, Labor noted, and will also be able to avoid paying lenders’ mortgage insurance (LMI), which could add up to a potential saving of up to $30,000, the party argued.
Only individuals earning less than $90,000, or couples earning under $120,000 per annum, are eligible.
What it means for lawyers looking to buy
In conversation with Lawyers Weekly, Legal Home Loans director Andrew Johnson said that it is great to see the new government committing to improving housing affordability and ownership for Australians.
This said, lawyers who want to take advantage of the scheme should move early, he added, given that there are only 10,000 places available.
“As we have seen previously, there has been a large amount of competition in government schemes when spaces were limited,” he warned.
“Due to income and property price caps as well as first-home-buyer eligibility criteria (regional) both schemes will be more suitable to younger lawyers starting out in their careers. More senior lawyers will likely find it harder to meet eligibility on the schemes.”
It is also important, Mr Johnson continued, that lawyers consider that – under the Help to Buy scheme – buyers will have to repay Labor’s financial contribution if their income exceeds the gross annual income threshold for two consecutive years at any time after their purchase.
“This may be unsuitable for lawyers, whose income typically increases quite rapidly as their careers progress,” he suggested.
“It’s essential that all lawyers are aware of what options are available exclusively for them in the banking industry net of government intervention. This includes, purchasing with a 10 per cent deposit with waived LMI and if a 10 per cent deposit is not available, utilising a parental guarantee.”
“The security of a legal career is taken into consideration by some banks when assessing home loan applications, because they view lawyers as low-risk borrowers,” Mr Johnson advised.
“This means they are more willing to offer those in the legal profession certain benefits without such onerous restrictions, which may be more applicable to the cohort.”
Ultimately, while the Albanese government’s schemes are great initiatives for Australians wanting to get into a property sooner, Mr Johnson surmised, “given the restriction of the schemes as well as the exclusive home loan benefits that are already available for lawyers, we believe there are more relevant options for the profession”.
“Whether lawyers are looking to discuss government initiatives or exclusive policies and benefits available at the bank, we recommend they speak with a trusted mortgage professional,” he concluded.
