Skin in the Game

Sharing Skin in the Game

Post-election, it feels like we can all breathe a bit easier after what was a tumultuous few weeks and what felt like conflicting messages coming from all different sides.

Whether you supported a change of government or not, certainty of government is generally better than the alternative so at least we have a clear decision made and can look forward once again.

From a property perspective, the major change we can expect in the next 12 months is the introduction of Labour’s proposed Shared Equity scheme that would see the government tip in to cover a portion of the value of your first home – 30% of the total value for existing homes and 40% for new builds.

In its proposed format, you act as the only land owner as far as responsibility for council rates, insurance and other maintenance costs, but you won’t be required to make any payments for the proportion that is government owned.

The positive side of this is that not only does it let more buyers get into the market with less money behind them, but they will also be paying far less in repayments along the way, given there is no mortgage over 40% of the value.

The downside is that when it comes time to sell, the government will take their share of any profits on the sale, and should your income or circumstances change for the better (taking you over the cap) then you will need to make arrangements to exit the scheme, either buying out the government owned portion or selling the property.

Now, there are definite benefits to this scheme as far as there will be a subset of people for whom this could be there only opportunity to own their own home, offering both affordability and eligibility. The incentive towards new builds does at least acknowledge that supply is an issue, even if it doesn’t make a huge difference to fixing the problem.

With house prices on the up, you could also argue that there is a potential for a return on investment for the government and that if there is a need for public investment in housing then this is one way to do it that encourages accountability as well. There is still the matter of an already heavily indebted government coming up with (borrowing) the money in the first place, as well as the question of what happens if a sale comes at a loss.

 Tom Quaid is the REIQ Zone Chair for Cairns