Tax Cuts Will BOOST Borrowing Power by $$$

Summary

This week's episode of 'Finance and 175' discusses significant federal budget updates for first-time home buyers, including tax cuts that could enhance borrowing power. It examines the housing affordability crisis, the gap between wages and property prices, and explores affordable suburbs in Perth. The show also covers the government's $6.2 billion housing package, the impact of student debt relief, and Western Australia's ban on rent bidding, aiming to provide insights and strategies for navigating the property market.

Takeaways

• 🏠 The federal budget announcement includes tax cuts that could boost borrowing power for first home buyers.
• 📉 Borrowing capacities have fallen by about 30% since interest rates started rising in May 2022, and the tax cut aims to help recover some of this capacity.
• 💰 Home buyers with different income levels could see their borrowing capacity increase by up to $25,000 to $40,000 depending on their earnings.
• 📚 Student debt relief is introduced, with the interest rate on HELP debts reverting to 3%, making it easier to pay off student loans and potentially increasing home buying capacity.
• 📈 The tax cuts are expected to stimulate the property market, as increased borrowing capacity may lead to higher house prices in the future.
• 🏢 The government's $6.2 billion housing package aims to boost the supply of affordable housing and includes infrastructure investments to unlock new housing supply.
• 🚫 The budget has received mixed reviews, with critics arguing that it doesn't go far enough in addressing the core issues of the affordability crisis.
• 🛑 The 'Help to Buy' scheme is being negotiated to pass through the Senate, which could assist Australians in home ownership by contributing up to 40% of the home's purchase price.
• 💹 There is a significant gap between wage growth and property prices, with home prices in capital cities growing by 93.5% while wages only increased by 34.7% over the past 12 years.
• 🌆 Perth offers some affordable housing options with suburbs where the median house price is $350,000 or less, providing opportunities for first-time buyers.
• 🚫 Western Australia has introduced a ban on rent bidding, which is expected to make the rental market fairer and potentially reduce competition for first-time home buyers.

Q & A

What is the main topic of discussion in this week's episode 175 of the property and finance series?

The main topic of discussion is the latest federal budget announcements and their impact on aspiring homeowners, including tax cuts that could boost borrowing power and a housing package aimed at addressing the affordability crisis.

How have borrowing capacities been affected since interest rates started rising in May 2022?

Borrowing capacities have fallen by about 30% since interest rates started rising in May 2022, making it more challenging for potential homeowners to enter the market.

What is the significance of the federal tax cut starting from July 1st for taxpayers?

The federal tax cut is significant as it will provide a tax reduction to every taxpayer, which can potentially increase their borrowing capacity, making homeownership more attainable.

How much could the tax cut increase the borrowing capacity for a home buyer with an income of $100,000?

A home buyer with an income of $100,000 could see their borrowing capacity increase by about $25,000 due to the tax cut.

What is the impact of the student debt relief announced in the budget?

The student debt relief will revert the interest rates on HELP debts (formerly known as HECS) or VET student loans from 7-8% back to 3%, making it easier and quicker for individuals to pay off their student loans.

How does paying off student loans before applying for a house impact one's buying capacity?

Paying off student loans before applying for a house can significantly increase one's buying capacity, as the amount of money paid off is based on income, not the debt amount.

What is the potential market impact of the tax cuts announced in the budget?

The tax cuts are expected to stimulate the market by increasing borrowing capacity, which may lead to higher house prices due to increased demand.

What is the government's approach to addressing the housing affordability crisis through the budget?

The government has unveiled a $6.2 billion housing package, which includes investment in affordable housing and infrastructure to boost the supply of new housing.

What is the criticism regarding the new funding for social housing in the budget?

Critics argue that the new funding for social housing is repackaged from existing funds, offering loans instead of direct grants, which may not be as effective in addressing affordability.

What is the 'Help to Buy' scheme mentioned in the script, and how could it impact home buyers?

The 'Help to Buy' scheme is a government initiative that could potentially help Australians into homeownership by contributing up to 40% of a home's purchase price in exchange for a proportional interest in the property.

What are some of the suburbs in Perth where the median house price is $350,000 or less?

Suburbs like Osborne Park, West Perth, and Hamilton Hill are examples of areas in Perth where one can find homes with a median price of $350,000 or less.

What is the recent change in Western Australia that could benefit first-time home buyers?

Western Australia has introduced a ban on rent bidding, which is expected to level the playing field for first-time home buyers and potentially reduce competition in the rental market.