Victorian Homebuyer Fund to end next year

On Tuesday (7 May), the Victorian state government handed down its state budget for 2024/2025, revealing that the Victorian Homebuyer Fund will cease after next year.

Presented by State Treasurer Tim Pallas MP and Premier Jacinta Allen, the budget sets out the funding for the state government for the next year.

Several of the key initiatives target the cost of living and supporting home buyers.

This is being done through a range of measures, including allocating funding to “promote more modern methods of construction, such as modular or prefabricated builds” and:

• Providing $197 million to continue support for people experiencing or at risk of homelessness, including grants for homelessness services, accommodation for people with complex needs, and crisis response services.
• Using $114 million to remove cladding identified as posing unacceptable risk from residential buildings.
• Investing $107 million to progress the government’s housing agenda, including $20 million to build roads and enabling infrastructure to unlock government-owned land in East Werribee.
• Investing $63 million to address systemic issues within the building sector, including strengthening the Victorian Building Authority.
• Using $19 million to improve response times for repairs and maintenance in social housing.

However, the Allen government also said that while it would put forward $700 million (up from $600,000) to extend the Victorian Homebuyer Fund to “accelerate more Victorians into home ownership”, this will be the last year the shared equity scheme will be available in its current form.

This is due to the anticipated introduction of the federal government’s proposed shared equity scheme Help to Buy.

In his budget speech, Pallas said: “We all know that nothing is more central to our safety and wellbeing than having a home. But right now, many families are getting priced out of the market. That’s why this Budget provides a further $700 million boost to the Victorian Homebuyer Fund – helping more Victorians realise their dream of owning a home and setting up our partnership with the Federal Government’s ‘Help to Buy’ scheme.”

The budget papers said that because the Commonwealth government is establishing Help to Buy, the Victorian government would “make a final investment in the Victorian Homebuyer Fund and will transition to the national scheme once it’s established”.

“Staggered monthly allocations will ensure funding is available until the establishment of Help to Buy,” the budget papers said.

HIA Victoria executive director Keith Ryan has welcomed the expanded funding for the Victorian Homebuyer Fund but said more detail was required to assess the impact of this decision by the Victorian government.

However, he was critical of the overall package’s efficacy: “[D]espite being promoted as ‘Helping Families’, [it] does little to help many families with their most significant challenge, which is to get into a home.

“Ultimately the Budget does not include significant measures to help address housing shortages, such as broader stamp duty reform, tax reductions and removals, planning and building law improvements, and an increased supply of land. It is hoped however that there will be future announcements this year from the Allan government which address this.”

What is the Victorian Homebuyer Fund?

First commenced in 2021 following a pilot, the fund sees the government contribute up to 25 per cent of the purchase price in exchange for a proportionate equity interest in the property.

Eligible borrowers only need 5 per cent deposit under the scheme (Aboriginal and Torres Strait Islander participants only require a 3.5 per cent deposit and are eligible for a 35 per cent shared equity contribution), with the remainder covered by a mortgage from participating lenders.

As the value of the property changes, so too does the value of the government’s interest (share) in the property (meaning the government also shares any capital gains proportionate to its interest in the property).

The scheme is currently available for properties priced at or under $950,000 in Melbourne and Geelong (or at or under $600,000 in regional Victoria) for those earning under $130,485 or less per annum for individuals or $208,775 or less per annum for joint applicants.

Participants are required to buy back the government’s share in their property over time through refinancing, using savings, or upon sale of the property.

[Related: Labor launches Help to Buy public consultation]