The NSW State Government announced shared equity housing to help eligible home buyers enter the property market.
The rising cost of living is fast becoming a critical issue in New South Wales, with the prices of nearly everything going through the roof.
According to ABS, the mean price of residential dwellings increased by $6,800 to $1,222,200 in NSW during the March quarter of 2022. Furthermore, it was the highest in the country.
In fact, over the last twelve months, growth in median prices in regional NSW outpaced growth in Sydney for both houses and attached dwellings. Victoria is the only other state to share this trend.
Housing costs comprise a significant component of Australian household living expenses. And, with spiralling prices, many potential home buyers in NSW are finding it difficult to achieve their goals of buying an affordable home.
Recognising the mounting challenges for those looking at entering the property market in NSW, the state government has introduced a shared equity housing scheme in its budget.
Suppose you are among the thousands of NSW frontline workers, including teachers, nurses, police officers, single parents and singles over 50. In that case, this could be your best chance to get a foothold in the property market.
Here are some details of the recent announcement, the eligibility criteria and how it works.
What is the New South Wales Government Shared Equity Scheme?
Ahead of the 2022-2023 state budget, Premier Dominic Perrottet announced that the government has committed $780.4 million under a new New South Wales government housing scheme.
As per the scheme, the NSW Government will pay a proportion of the home buyer’s property purchase price. In exchange, it will have an equivalent ownership share of that property.
In the case of a new home, the state government’s equity contribution will be up to 40 per cent of the purchase price. On an existing dwelling, the contribution will be capped at 30 per cent of the purchase price.
One of the key objectives of the shared equity scheme by the NSW government is to make home ownership a reality for more people across NSW. However, there are specific caps imposed on property prices.
Suppose you are considering buying a home in Sydney or one of the major regional centres, including Illawarra, Lake Macquarie, Newcastle, Central Coast and North Coast of NSW. In that case, your property price must be less than $950,000.
On the other hand, if you're looking at homes in other regional areas of NSW, the property price should be less than $600,000.
Who Can Apply for the NSW Shared Equity Scheme?
As per the information published by the NSW government, you could be eligible for the NSW shared equity housing scheme if you meet any of the following criteria:
- You are a frontline worker (nurse, teacher, police) buying your first home.
- You are a single parent with a child or children below 18 years of age, or
- You are a single person, 50 years of age or above.
If you are a first home buyer but do not qualify for the shared equity scheme, you may be eligible for other options for first home buyers, including:
What are the Advantages and Disadvantages of the Shared Equity Scheme?
“The shared equity scheme has been designed to provide eligible home buyers across NSW an opportunity to buy a house and live their dreams. The programme will help our police, nurses, teachers, single parents, and older singles enter the property market in the current scenario of rising interest rates and rental prices. Even better, it will put them on the fast track to homeownership,” says Graeme John, Head of Growth at Joust.
Advantages
Lower Mortgage Repayments
With the NSW government contributing up to 40 per cent of the property purchase price (for a new dwelling) and up to 30 per cent (in the case of an existing dwelling), home buyers can benefit from a significantly smaller size of the mortgage and lower monthly mortgage repayments.
Low Deposit and No LMI
Eligible home buyers will need to have a minimum deposit of 2 per cent of the purchase price. The sweetener is that they will be exempt from Lenders Mortgage Insurance (LMI), which can otherwise be expensive and significantly increase the overall cost of the loan.
Flexible
Eligible participants do not have to make repayments on the equity contribution. In addition, they will not be charged interest or rent while they remain eligible for the scheme.
Instead, home buyers can make voluntary payments while advancing towards full ownership of their property.
Niche
The focus of the eligibility criteria aims to assist niche groups, including single parents and older singles, who are likely to face more challenges with their mortgage repayments.
The shared equity housing plan will also enable many public sector workers to enter the housing market and buy their first home with as low as a 2 per cent deposit.
Availability
The scheme is scheduled to begin in January 2023. Applications will be accepted during the two financial years, 2022-23 and 2023-24. Each financial year will see 3,000 places become available.
In addition, the scheme will tie in with the federal government's shared equity scheme. This effectively doubles the number of homes available for frontline workers and singles over 50. Participants will still remain eligible for First Home Buyer assistance and duty or land tax concessions.
Support
After being accepted, if at any time during the mortgage term you become ineligible, Revenue NSW will work with you to find pathways to meet the obligation.
Disadvantages
Price Cap
The shared equity programme seeks to enable people to live closer to where they want to work, live and raise a family. However, there are limitations regarding who can access it. For example, it is unlikely to benefit eligible home buyers who work in the inner suburbs of Sydney because very few properties here are likely to meet the price cap.
Excluded Costs
All costs related to purchasing and selling a property, including stamp duty, must be borne by the home buyer.
Are There Any Additional Eligibility Requirements?
In addition to the essential eligibility criteria, there are other requirements that you would need to meet to qualify for the scheme.
Eligibility Requirements
Age and Citizenship
You must be at least 18 years of age, an Australian or New Zealand citizen, or a permanent Australian resident to apply.
Gross Income
If you are a single applicant, your household's gross income must not be more than $90,000. For couples applying, this threshold is $120,000.
Minimum Deposit
You will need to show a minimum deposit of 2 per cent of the purchase price of your property.
Owner-Occupier
You should not own an interest in any land within Australia or abroad at the time of purchase. And you must occupy the property purchased under the scheme as your primary residence.
Serviceability
You will need to service your mortgage with a participating lender and Government equity contribution. You should not be able to pay the mortgage on your property purchase without the government equity contribution.
Can Home Buyer Eligibility Change After Being Approved?
Yes. Therefore, to maintain your eligibility, you will need to comply with ongoing obligations.
You will need to complete an annual review while providing information to support your eligibility. Likewise, you would need to ensure that renovations or modifications, if undertaken, are subject to government approvals.
Lastly, you will be responsible for making timely payments towards property costs, including water, council rates and your home loan repayment.
What if the Home Buyer No Longer Meets the Eligibility Requirements?
It is possible that your employment circumstances may change or you remarry, in which case you would no longer be eligible for the shared equity housing scheme.
In specific situations, including those where you become ineligible for the scheme, you would have to start your repayment of the Government’s equity contribution.
Likewise, if your income surpasses the applicable threshold on two consecutive annual review reporting dates, you will have to start repayment of the government’s equity contribution.
How Joust Can Help
Housing security is the key to financial security. However, given the recent hike in interest rates and rentals, many home buyers are undecided if it's the right time to buy a home. Nevertheless, with careful planning and understanding of the various home loan options available, you can still achieve your goal of purchasing a home.
Suppose you are a first home buyer planning to enter the property market. In that case, you could start the process using our free Mortgage Calculators to discover your borrowing power, compare available home loans, interest rates and more.
Once you know the approximate costs, you can weigh the different options and choose an affordable home loan that gets you to the home ownership stage in the shortest time.
