We’ve obviously heard the federal budget announced last night, and while some future forecasting can feel almost superfluous these days with a pandemic notch under our belt, it is very interesting and helpful still to learn what kinds of subsidies and schemes the government is putting into action, their knock-on effect, and the why. Included in this, some exciting announcements for first home buyers especially, and indicators for smart investors, without a doubt.

Namely, the Treasurer, Josh Frydenberg announced the Government’s Home Guarantee Scheme, which helped almost 60,000 Australians purchase their first home, has been extended to 50,000 places per year. Up to 35,000 places per year will be available for first home buyers under the First Home Guarantee (formerly known as the First Home Loan Deposit Scheme). Where now importantly first home buyers will only need a 5% deposit for an eligible loan from a Participating Lender.

It shows the government is trying to do something about the current house price issue, and that feels good. Understandably, it’s getting very expensive for first home buyers. Coming up with a healthy 20% deposit is definitely hard for most. Alongside the average house price in NSW going for around $840,000 as at 2021, and news the likes of a 17sqm ‘micro apartment’ in Sydney’s Potts Point recently listed for $469,000. Dramatically reducing the required deposit to just 5% will certainly help a lot of people secure their first home, or start building their property portfolio, sooner. 

Admittedly, working within relevant state price caps, the schemes seem to provide enough of a push to keep encouraging buyers to think outside the box. Investors are increasingly considering buying interstate (outside of NSW specifically, where the average purchaser is still very priced out), or ‘rentvesting’ in other ways. 

We see consumer confidence being helped also with little things like petrol to be slightly subsidised for the next 6 months, where midsize car owners could save $12 per week. That has a knock-on effect on monthly disposable income and savings. 

Easing cost of living pressures like this, amidst the current very heavily covered European conflict, certainly makes a difference to overall peace of mind. They’re measures that translate in many cases to more savings, faster – that can hopefully help you better accumulate that house deposit, or associated costs for your next property. Coupled with many enjoying more work from home and reduced commuting costs as a result, as well as a mention from the Treasurer of incoming tax cuts, the medium-term outlook for property can actually be felt to be pretty positive.

Even if interest rates go up, we know they’ll still be at record lows historically. Not to mention the unemployment rate, that’s usually tied to interest rates going up, is now at its lowest in 42 years, at 4%. It's undoubtedly a positive indicator that the economy is moving in the right direction – we’re recovering. 

Importantly, that doesn’t change the likelihood of inflation feeling like a massive problem soon. We’re already seeing the impacts of this of course in the US, where people are currently experiencing inflation at a jarring rate of 7.9%. Where the effects of printing all that money since the peak of the pandemic, are still being felt from last year. It’s just a matter of time, with the reality of things like global supply chains, before the true inflationary effect is felt in Australia. When it happens, our buying power is going to be reduced and unfortunately, that’s going to penalise people who are still saving – potentially for that first home deposit, holding them back further from getting ahead. 

It will be interesting to see what other changes might become apparent, to interest rates for example, after the soon to be held federal election – there’s currently still a lot of money floating around. People who are afraid or try simply holding onto cash, will in a couple of years time realise that cash is going to be worth less and less. Smart investors will be putting money into asset investments, such as property, where money is active. Making choices where their money is working harder for them will basically preserve their money in the long-term. 

How far and wide the impact of this year’s budget will be felt for those active in the property space, is not known. While definitely helpful, once accepted into these schemes the focus becomes finding a property that falls within a buyer’s preferred state price cap. Where price caps vary from $800,000 in NSW hotspots, and the average median house price there, we know, sitting just north of that. 

Avoiding people getting too complacent seems to be the focus of the energy behind this year’s budget. There can easily be a feeling after the last couple of years, in spite of war and the pandemic still not over, to feel on home soil like we’re almost finally catching a break. Understandably, it could be very tempting to the average consumer to hold onto their money for a minute, to simply catch their breath. 

Ultimately, successful investor thinking always links back to the long-term. In spite of these outside forces, once we recover from the intensity of them, it can be seen from history that there tends to be a stronger comeback. Thankfully, in the meantime, it’s feeling like the government’s temporary measures will at least get the engine going again.