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Broker support is critical for borrowers looking to capitalise on the government’s new housing grants, Aussie Home Loans has stressed, with observers warning that the scheme is “vulnerable to exploitation”.
The federal government yesterday announced that a $25,000 grant will be available to owner-occupiers “substantially renovating” or building a new home from 4 June to 31 December 2020, after it unveiled its new $688-million HomeBuilder package.
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A national price cap of $750,000 has been set for new home builds, and a renovation price range of $150,000 to $750,000 will apply to renovating an existing home with a current value of no more than $1.5 million.
Those building a new home must also commence construction within three months of the contract date.
The grants will also be means tested, with the government setting income caps of $125,000 for singles and $200,000 for couples. An applicant’s eligibility will be based on their latest assessable income.
The stimulus is designed to breathe life into the residential property market, which is facing a prolonged downturn off the back of the COVID-19 crisis.
The government estimates that approximately 27,000 grants would be handed out as part of the package across $10 billion in building projects, supporting 140,000 direct jobs and another 1,000,000 related jobs in the residential construction sector.
The stimulus has been largely welcomed by the property industry, which has been calling for fiscal support.
However, some stakeholders have flagged potential risks associated with the new scheme.
According to director of Builder Finders, Lynette Manciameli, the scheme could be “vulnerable to exploitation” from “unscrupulous builders”.
“We welcome the HomeBuilder scheme, as it will give the construction industry a much-needed boost in these unprecedented times while allowing Australians to pursue their building and renovation aspirations,” she said.
“However, as we saw with the pink batts disaster following the [global financial crisis], even the best laid plans can have unintended consequences. Incentivised by the opportunity to make quick cash, several irresponsible operators delivered substandard work, scammed unwitting customers or placed untrained young workers at risk.
“What we are likely to see off the back of the HomeBuilder scheme is dodgy builders coming out of the woodwork. This is bad news for the consumer and bad news for the many reputable builders who are doing the right thing.”
Mrs Manciameli urged HomeBuilder applicants to “do their due diligence” when selecting a builder for their project.
“There are several builders out there who are doing the right thing and have a sterling reputation for quality,” she said.
“Consumers should do everything in their power to vet builders, including seeking out testimonials and checking credit scores. This will help them avoid being saddled with a dodgy builder before it’s too late.”
Meanwhile, Aussie Home Loans CEO James Symond urged applicants not to “rush in” to the scheme before considering their financing options.
“We welcome the $688-million government program and encourage owner-occupiers seeking the grant to receive guidance from a broker to help them understand their options,” he said.
“Those eligible will need to carefully assess how to finance their build or renovation to take advantage of the HomeBuilder scheme.
“The government scheme comes with a range of conditions, timelines and a limited number of grants available, so it is important for Australians not to hesitate, but also not to rush in without understanding their financing options.”
Mr Symond added that by consulting a broker, borrowers could reap the benefits of both lower loan repayments and fiscal support form the government.
“A decision to see a broker could save borrowers money and years off their repayments over the life of the mortgage, while taking advantage of the HomeBuilder grant program,” he concluded.
[Related: Brokers write half of FHLDS scheme]
