The Federal Government has introduced measures targeted at keeping the dream of home ownership alive for middle-income Australians.

The 2022 Federal Budget, released by Treasurer Josh Frydenberg on March 29, also forecasts strong economic growth, low unemployment and rising wages growth. These forecasts could set the scene for an upbeat housing market for first, second- and third-time home buyers, as well as for property investors, in the 2022-23 year.

The Government’s expanded Home Guarantee Scheme is a major plus for aspiring younger buyers as it will significantly reduce the time needed to save a deposit.

In his Budget speech Mr Frydenberg announced measures to more than double the eligibility of the Home Guarantee Scheme to 50,000 places a year to give first-home buyers a better chance of entering the market.

The 50,000 places will include 10,000 set aside for properties in regional areas, with 5000 for eligible single parents.

Expanding the scheme – which allows first-time buyers to make purchases with just a 5 per cent deposit – will cost $8.6 billion over four years from 2022-23. The scheme is available to couples with a combined income of less than $200,000 or singles earning $125,000.

Insurance burden lifted 

The changes mean tens of thousands more aspiring homeowners will be able to purchase a property without having to save a 20 per cent deposit or take out lenders mortgage insurance. Instead, the cash support from the scheme will enable younger buyers to purchase a $600,000 home with a deposit of just $30,000.

With the Government providing a guarantee for up to 15 per cent of the purchase price, this will waive the need for lenders mortgage insurance.

Meanwhile, single parents aiming to enter or re-enter the property market will be able to buy with a deposit of just 2 per cent, via the Family Home Guarantee, which has been expanded from 10,000 places over four years to 5000 places each year.

Many young buyers eligible

Participants in the revamped scheme must be buying a home to live in, not an investment. The amount they can spend on a property varies according to location and whether or not a new or existing home is being purchased.

There were no changes to price caps in the Budget, despite rapidly rising property prices. Median dwelling value across the capital cities jumped 19.2 per cent for the year to February, according to CoreLogic figures, while values in regional Australia grew by 25.5 per cent.

Price caps cut in

In Sydney, just one in seven suburbs now has a median dwelling value, covering both houses and units, at or below $800,000 - the current price cap for the Family Home Guarantee, the new name for the Government’s previous First Home Loan Deposit Scheme. Under the current conditions, new homes have a higher price cap of $950,000.

One in five Melbourne suburbs has a median at or below the city’s existing price cap of $700,000, CoreLogic data shows.

What impact will the scheme have?

Earlier rounds of the scheme have been quickly snapped up, with almost 60,000 aspiring homeowners already using the government guarantee to get into a first home.

The scheme will massively cut down the time needed to save a deposit. This has climbed to more than eight years for the average Sydney couple looking to save a 20 per cent deposit for an entry-level home, according to recent Domain research. Meanwhile, Melbourne first-time buyers require 6.5 years to save a deposit, while their Brisbane counterparts will take four years and 10 months.

Affordable housing targeted

Another key housing-related Budget measure is a $2 billion increase to the lending capacity of the National Housing Finance and Investment Corporation (NHFIC). The corporation provides low-cost loans to community housing providers working to increase the supply of affordable housing.

The lift in NHFIC’s liability cap, from $3.5 billion to $5.5 billion, will help support around 10,000 more affordable homes for vulnerable Australians. It has already supported more than 15,000 new and existing affordable dwellings.

Low jobless rate

The state of the jobs market is a key driving factor affecting the housing market, and the Budget shows that employment in Australia has made a strong recovery following lockdowns and other pandemic restrictions.

The unemployment rate fell to a multi-decade low of 4 per cent in February. The Budget forecasts that rate to fall to 3.75 per cent in the September quarter of 2022 and remain at that level until the end of 2024-25.

Mr Frydenberg says low unemployment and rising wages growth will be likely key features of the Australian economy going forward, although the ongoing coronavirus pandemic and war in Ukraine pose threats to growth.

The economy is forecast to expand by a strong level of 4.5 per cent this financial year, up from the 3.75 per cent tipped in December, to be followed up by a healthy 3.5 per cent in 2022-2023.

“Now that pandemic-related activity restrictions have been wound back and vaccination, along with improved treatment options, are the primary tools for managing the virus, the conditions are in place for a sustained economic recovery,” the Budget papers indicate.

Overseas migration

An upswing in overseas migration following the reopening of the international border will underpin consumption growth and dwelling investment. The Budget predicts net overseas migration to surge from just 41,000 people this financial year to 235,000 in 2024-25.

“The reopening of international borders will see the return of migrants and international students, supporting growth in consumption and education exports and assisting in filling skill gaps,” the Budget says.

The fuel excise reduction of 22¢ a litre announced in the Budget is expected to reduce headline inflation by 0.25 of a percentage point in the June quarter of 2022, before being withdrawn in late 2022 as oil prices are expected to moderate.