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The state has launched a new home-buyer fund, under which it will pay 25 per cent of the property purchase price if eligible borrowers have a 5 per cent deposit.
The Victorian government has introduced the $500 million Victorian Homebuyer Fund (VHF), which is expected to support more than 3,000 home buyers.
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Under the VHF, eligible participants will only require a minimum deposit of 5 per cent, while the government will provide up to 25 per cent of the purchase price in exchange for an equivalent share in the property.
The remaining 70 per cent would be financed by the home buyer’s chosen lender.
The lender participants currently include Bank Australia and Bendigo Bank.
Aboriginal and Torres Strait Islander home buyers can buy with a deposit as low as 3.5 per cent and receive a government contribution of up to 35 per cent, in exchange for an equivalent share in the property.
The fund is an expansion of the government’s $50 million HomesVic Shared Equity Initiative, which was a pilot program that supported more than 355 households to buy their first home.
However, the eligibility criteria under the VHF will be broader than the HomesVic pilot, which would make shared equity accessible to more home buyers, according to the Victorian government.
Under the new scheme, home buyers will no longer be required to be first home buyers. They can also buy in a broader range of locations, and have higher household incomes than compared to the earlier pilot.
To be eligible to participate in the fund, home buyers need to:
- Be an Australian citizen or permanent resident over the age of 18 years, who currently do not have an interest in a property and who meet the income thresholds
- Have a gross annual income of $125,000 per annum or less for individuals or $200,000 or less per annum for joint applicants
- Be a natural person (that is, not an organisation, company, trust or other body or entity)
- Occupy the purchased property as their principal place of residence
- Not purchase the property from a vendor who is related
- Not own any interest in any land at the time of purchase (including as trustee of a trust or beneficiary under the trust)
- Not be acting as a trustee of a trust
- Not be a shareholder in any corporation (other than a public company) that owns any land
If subsequent assessments by the state and a participating lender are approved, eligible participants must become registered owners of the property they purchase.
Home buyers can buy out the government’s share at market value over time if they choose, with funds then reinvested to help other prospective home buyers enter the market.
As the value of the property changes, so too will the value of the state’s share or interest in the property, which will mean that the VHF will share in any gains in the home buyer’s property’s value.
Participants can repay the home-buyer fund’s share or interest in their property over time. Repayments can be made using refinancing, savings, and from proceeds when the property is sold.
Eligible participants can purchase in any location in metropolitan Melbourne, and will be provided with regional options when searching for a property. Property price caps are $950,000 in metropolitan Melbourne and Geelong, and $600,000 in regional Victoria excluding Geelong.
The purchase can be for an existing or new property provided that a certificate of occupancy has been issued prior to the date of the contract of sale, meaning that off-the-plan property purchases are not eligible.
The property must be vacant when purchased, or, if under a lease, the lease must expire within 12 months of the acquisition date and any tenants must vacate the property.
Fund participants are still eligible for other Victorian government housing schemes, including the First Home Owner Grant and first home buyer stamp duty concessions or exemptions.
Commenting on the incentive, Victorian Treasurer Tim Pallas said that the coronavirus pandemic has heightened financial pressures for home buyers, and highlighted the value of having stable, affordable, secure, and safe housing.
He said: “It can take years to save for a deposit – through our Victorian Homebuyer Fund, more than 3,000 Victorians are expected to enter their own home sooner.
“This will make it easier to secure your own home and we’re proud to play our part in helping Victorians realise this dream – because there’s no place like home and we want every Victorian to know that feeling.”
[Related: Dwelling approvals bounce back after stimulus wind-down]
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