There was much excitement when news of the government’s building stimulus package started circulating, but once the finer details were confirmed last week, that excitement mostly turned to disappointment for would-be renovators. For those wanting to build a new home though, things look a lot brighter, providing you can do it for under $750k.
In short, the package offers a $25,000 grant to renovate, but only if you earn less than $200,000 between you (or $125,000 for singles) and your unrenovated home is worth no more than $1.5m. And if you meet those criteria, you need to spend big to get it. Your reno must be worth between $150,000 to $750,000. For new home builders, it’s also $25,000 but your house and land package can’t cost more than $750,000. Read more details on the restrictions.
Anna Williams’ business, Your Beautiful Home, helps clients with their renovations every step of the way from getting planning approval to the interior design. Based in Sydney’s Northern Beaches, she doesn’t think the scheme goes far enough to make a significant difference. “The criteria are very difficult to comply with. To set a blanket maximum value of $1.5m for the pre-renovated home across Australia makes it very difficult for people in Sydney and Melbourne to take advantage of the grant. With the average median house price in the Northern Beaches over $2 million, it rules out all our clients.”
The means-tested element is a bit too tough in her opinion, ruling out a lot of families who could be taking advantage of the grant and helping to fuel the construction industry. “Again, this rules out all of our mum and dad clients who are hoping to do some work on their family home in Sydney. In most suburbs in Sydney this is not a large income and I doubt that many people in this income bracket are in a position to do substantial renovations anyway.”
Christal Fysentzou’s Queensland business Zou Build specialises in renovations and extensions and she doesn’t think the scheme will make a huge difference to people looking to improve their existing homes. “If you’re already planning a renovation it could be beneficial, but $25,000 doesn’t really get you far in a major renovation. I don’t think that it’s enough to stimulate people to spend $150,000 or more.”
Architect Amelia Lee, of Undercover Architect, has mixed feelings about the whole scheme and will be watching with interest to see how state governments roll it out. She says for many people, it could all be too much of a rush, and even lead to costly mistakes.
“It’s a complex problem to solve,” she says. “There’ll be a group of homeowners who will meet the criteria for means testing and property/contract values, and timing-wise will be able to slot into the window of opportunity available. If you’re ready to start construction very soon, or you have a builder locked in who can commence construction within the required timeframe, and you meet all the financial metrics on your project and income, this will be a huge gift. However, as an injection to stimulate the long term performance of the industry overall, I don’t think it’s a great solution.”
She believes the scheme misses the chance to help people get started on longer-tail projects. “Linking it to building contracts, while easily traceable, means it actually incentivises the speedy completion of projects, not the intentional commencement of projects. For many homeowners doing renovations and custom builders, getting started now won’t meet the required deadlines.”
She adds: “The government has cited a decline in building approvals as the reason for doing it, so I feel it would have been better to track eligibility against that as a metric. Or against lodgements with council. There are many projects where design, costing, council approvals, and getting up to signing a contract, can take 12-to-18 months (even longer sometimes). Incentivising the commencement of projects would help feed the industry for a much longer timeframe than the next six months. And it would support the industry well beyond the builder/trade/supplier part of the sector, and support designers and other professional consultants involved in the earlier phases of projects.”
Amelia suspects volume and project home builders will benefit the most, where their business model is set up to help people get from selection to site start much faster.
For those renovating, finding a builder who can start by the required time will be key. “I think you’ll see less scrupulous operators drive up prices as people push and race to get their contracts signed within the timeframe, and people making decisions in haste, which is never good when building and renovating.
“Given it can be combined with the First Home Buyer grants to give people access to $50,000 in some cases, it may just put a huge amount of pressure on the industry at large and drive up prices in the supply chain, which could swallow up the $25,000 very quickly. And you’ll see pressure on the industry generally, as everyone races to meet the criteria of a site start before 31 March 2021.”
In the scale of a new build or major renovation, Amelia notes you could easily waste or overspend $25,000 by rushing, making misinformed decisions, not checking your drawings or contract thoroughly, or experiencing variations during construction.
Interior designer and TV personality James Treble, is more positive about the scheme, but also thinks the benefit will be seen more in the new build market than for renovators of existing homes.
“Whilst the fact it’s mean-tested is a positive thing, there are some pretty high hurdles to jump for many people hoping to take advantage of this stimulus. Many people either earn above the set income, or their property value sits above the selected criteria amount,” says James.
“My thoughts are that it could be increased as the upper end of the market will not qualify for this stimulus, and while some will argue that they can already afford their renovations, the reality is that a $2 million property price is not out of the norm in the capitals, and there’s a whole swathe of trades and services which also service that market. Increasing the property value amount, whilst retaining the criteria guidelines, would make good financial sense to me.”
In outer suburbs and regional areas, James says the grants will be very popular, as house and land packages will be far easier to fit under the $750,000 limit. “Let’s face it, $25,000 is not to be sneezed at! Speaking with my own builders and collegues, we’ve already seen a positive increase just over the past weekend, in foot traffic in display villages and enquiry levels for project and smaller boutique builders, which is a very positive result.
“As so many people have been stuck in their homes, being faced with the reality that perhaps they don’t suit thier families’ needs, the added stimulus can only add more incentive for Australians to take the exciting plunge into new home ownership. The benefit of course is that the new build industry has a massive flow on effect with so many Australian owned businesses, trades, sub-contractors and mum and dad businesses benefiting directly from the work and positive sentiment in the economy.”
Renovation expert Naomi Findlay, who is based in the Newcastle region of NSW, where housing is less expensive than Sydney, for example, says the scheme should be welcomed and urges anyone wanting to take advantage of it to build a new home to start making plans straight away so they’re not rushing to sign a contract without having time to look at it properly.
“The renovation side of the grant is amazing too! But it is mainly for bigger renos with the minimum value added being $150,000. It will be interesting to see how that is measured. So if all you wanted to do was your bathroom or a smaller reno, I’m not sure that it will have you covered. It is a great opportunity however for those already planning or wanting to build or renovate. I look forward to seeing more criteria released on the renovation side of things.”
Home builder Metricon has, not surprisingly, welcomed the grant scheme saying there’s never been a better time to buy your first home if you meet the criteria.
CEO Mario Biasin, adds: “Not only will it make it easier for Australians to build a home, it also helps stabilise the economy, keeping thousands of our direct and indirect workers in the residential construction sector employed. We support any government initiative that assists Australians to invest in the housing market and protects our employees’ livelihoods during the challenging circumstances brought on by COVID-19.”
The scheme will work along existing state and territory first home owner grants programs, stamp duty concessions and other grant schemes, including the Federal Government’s First Home Loan Deposit Scheme and First Home Super Saver Scheme.
“The combination of the grant, record low interest rates and affordable new housing options means that building a home has never been more within reach,” Mario concluded.
To bolster the grant’s impact, Metricon is offering a further bonus of up to $40,000 on top of this and other grants on a range of home designs. It also partners with finance specialists to support the unique circumstances of its customers.