Victoria is launching a $500 million fund to get homebuyers into the market, in exchange for a share in the property.
- Most recipients of the Victorian Homebuyers Fund will need to have a 5 per cent deposit, with the government chipping in up to 25 per cent on top of that
- The government will keep that stake in the home until the property is sold or the owner buys out its share
- However, the opposition has accused the government of giving with one hand and taking away with the other because of hikes in stamp duty and land tax
Treasurer Tim Pallas said the Victorian Homebuyers Fund (VHF) is expected to help about 3,000 residents buy a home.
The fund is an expansion of the $50 million HomesVic Shared Equity Initiative, which the government said helped more than 330 households into the market.
Under the plan, would-be homeowners need to have a 5 per cent deposit, with the government able to kick in up to 25 per cent of the value of the home.
They do not need to be first homebuyers, but cannot currently own a property.
“They’ll be able to buy homes with the help of the Victorian government, which will be an equity partner in the purchase,” Mr Pallas said.
Aboriginal and Torres Strait Islander Victorians will be able to apply for the fund with only a 3.5 per cent deposit.
In Melbourne and Geelong, the homes need to cost $950,000 or less, with the cap in the rest of the state at $600,000.
Recipients of the funding can then either buy out the state’s share in the home or give the same proportion of the value back the VHF when they sell.
“We will put that money back into the fund, so this will become self-sustaining in all likelihood, given the continuing and historical appreciation and value of assets over time,” Mr Pallas said.
The Treasurer said people would still need to be able to demonstrate they could put together a deposit and banks would assess credit scores and capacity to meet mortgage repayments.
Despite the economic effect of the pandemic, house prices in Melbourne and the rest of the state have broadly been rising, locking more people out of the market.
Mr Pallas denied the scheme would further push up house prices, something some economists say can be caused by tax breaks and incentives for homeowners.
“It’s not something that will effectively augment the price,” he said.
“We’re not putting more money into people’s pockets … we’re giving them the opportunity to participate in a competitive market.”
The state’s coffers are still greatly affected by the impact of the pandemic, with the latest budget projecting debt to hit $156 billion by 2025.
Mr Pallas defended the extra $500 million in spending, saying the revenue would be returned to the state.
“People need assistance all the way through the pandemic and as the economy grows,” he said.
“And, more importantly, we can’t use the pandemic as an excuse to be a one-trick pony.”
As part of the revenue-raising measures of its budget, the government increased premium land tax and stamp duty and introduced a new windfall gains tax.
Shadow Treasurer David Davis accused the government of contributing to the housing affordability crisis.
“These programs are part of their approach to give with one hand and take away with the other,” he said in a statement.
“The massive taxes on new homes have been jacked up to pay for Labor’s mismanagement of infrastructure projects and their cost blowouts.”
Meanwhile, the Real Estate Institute of Victoria welcomed “any support from government that assists more Victorians to enter and remain in the property market”.
“The Victorian Homebuyer Fund seems to be a sensible policy that will be particularly helpful to [first-time] entrants in the property market,'” REIV chief executive Gil King said.