NSW to trial shared equity home ownership scheme

Buyers will need to have a deposit of at least 2 per cent of the property price and they will be able to skip lenders mortgage insurance.

The scheme will be extended to key worker first home buyers (teachers, nurses or police) as well as older singles over 50 and single parents with children aged under 18 years old – but they must not own property or have an interest in any land in Australia or overseas.

Under the trial, up to 3,000 spots will be available each year for two financial years.

The scheme is part of a broader $2.8 billion housing package that the NSW government is unveiling under its new budget, which will be handed down tomorrow (21 June).

No repayments will be required on the government’s equity contribution under the new scheme, and no interest or rent will be charged. The government has promised that buyers will be able to make voluntary payments to progress to full ownership of their property.

Participants will need to have a maximum gross income of $90,000 for singles and $120,000 for couples.

They also must not be able to service the mortgage for the property without the equity contribution, but they will have to be able to service the mortgage with a participating lender under the scheme.

The maximum value of property that can be purchased under the scheme is $950,000 in Sydney and regional centres such as the Central Coast, Illawarra, Lake Macquarie, Newcastle and the North Coast of NSW, while other parts of NSW face a cap of $600,000.

For a new home costing $950,000 for example, the 40 per cent equity contribution would work out to around $380,000. The government has calculated that this would lower monthly mortgage repayments by around $1,800 (assuming a 4 per cent interest rate over a 30-year term).

For an existing home that costs $600,000, the 30 per cent equity contribution would be around $180,000. The government has estimated that the equity contribution would lower monthly mortgage repayments by around $860 (assuming a 4 per cent interest rate over a 30-year term).

The scheme is planned to start in January 2023.

Premier Dominic Perrottet commented: “One of the government’s priorities is to make home ownership a reality for more people across our state and allow people to live closer to where they want to work, live and raise a family.

“This budget continues our focus on significant and important reform to create a brighter future for NSW families.”

Treasurer Matt Kean added that the government is aiming to help older singles struggling to find secure housing, as the number of women aged over 55 is among the fastest-growing cohort of homeless people in Australia.

“Housing security is the bedrock of financial security,” Mr Kean said.

“A safe and secure home is fundamental to allow people to earn an income, care for their loved ones and pursue their own interests and aspirations.”

Meanwhile NSW Minister for Homes, Anthony Roberts, commented the scheme will not only help participants overcome the deposit barrier to home ownership, but also reduce the size of their mortgage and repayments.

“It marks another step in the government’s plan to ensure that every person in NSW has a place to call home,” Mr Roberts said.

The new program has followed on from reports last week that the state will also reform stamp duty – giving buyers the option to choose to pay a land tax instead. 

The new land tax, the details of which will be confirmed in the state budget, will apply to properties rather than being tied to buyers – meaning any owner afterwards would not have the choice to switch to stamp duty instead. 

As Queensland is set to also release its budget on Tuesday (21 June), the Sunshine State has also been urged to consider reviewing its policy on stamp duty.

Meanwhile, at a federal level, the newly elected Labor government had promised to launch a national shared equity scheme during its election campaign.

Other states such as Western Australia and Tasmania already operate their own iterations of the program. Victoria launched its own $500 million shared equity scheme late last year. 

[Related: Web of definitions weighing down financial services law: ALRC]