HomeBuilder scheme: Some home buyers unable to count $25,000 grant towards deposit

Home buyers in some states will not be able to count the $25,000 HomeBuilder grant as part of their deposit when applying for a loan to build a new home, experts have warned.

The federal scheme was announced in June in a bid to boost the construction industry, encouraging new builds and home renovations.

Demand for house and land packages surged but many found out they were unable to access the money until after the build commenced. As people scrambled to fill the funding gap, some sales fell through.

The scheme works differently to the first-home owners grant, which banks can apply for and count towards a borrower’s deposit.

The HomeBuilder grant is issued directly to the individual through each state and territory’s respective revenue office after meeting the criteria, including that foundations of a new build have been laid.

Some states are implementing workarounds to allow buyers to include the grant as part of their deposit. Queensland reportedly made such a change last week, but it came too late for some buyers.

Mortgage Choice Ormeau principal Deslie Taylor said a huge influx of people in Brisbane rushed to snap up land and house packages between the June announcement and the release of guidelines that affected their decision.

“People were entering into land and house contracts and now there are a lot of people who are unable to fulfil the commitment that they entered into because they can’t use that grant as part of their deposit,” Ms Taylor said.

Some home buyers had to leave their plans behind, others borrowed money from family in the short term and some sold assets to meet the $25,000 shortfall, she said.

The scheme’s portal and guidelines were not up and running until recently, weeks after the June announcement, which caused confusion for many hopeful home owners, Ms Taylor said.

“It was almost like someone was dangling the carrot and at the 11th hour pulling it away,” she said.

“Unfortunately it was quite sloppy in regards to how [the scheme] was introduced. It wasn’t well done.”

Queensland’s State Revenue Office only last week amended its scheme to allow for a conditional approval for a new build, according to banking sources.

Home builders and renovators should also be able to use the grant towards their deposit in Tasmania and South Australia with the Northern Territory expected to introduce it as well, banking sources said.

The Commonwealth Bank of Australia confirmed to Domain that the bank would not consider the grant as part of a customer’s deposit if their jurisdiction does not allow for conditional approval.

An ANZ spokesman said it was still working through the implementation of the scheme in each state and territory, while Westpac did not directly answer a question on whether it took the grant into consideration when lending.

A spokesman for the Minister for Housing and Assistant Treasurer Michael Sukkar said the federal government was working with the banking industry to help with the implementation of the scheme.

“The Federal Government has been working cooperatively with the banking industry to assist with their HomeBuilder implementation programmes,” the spokesman said.

“While it is a matter for financial institutions as to how they treat HomeBuilder grants in relation to deposits and loan serviceability, we encourage them to take all necessary steps to help more Australians take part in this successful programme.”

An Australian Banking Association spokeswoman said the body has been in discussions with Commonwealth, state and territory governments “to make sure we are ready to assist customers access this program to support economic activity at such a critical time for the economy”.

Home builders in the country’s two biggest states are still locked out from using the scheme unless they have the money in the first place.

Sydney-based Mortgage Choice broker Rob Lees said he was inundated with inquiries from interested clients but none were able to access the scheme under the criteria.

“If people have to come up with the money first to complete the construction and then they get that bonus after the fact, it’s not really going to sufficiently incentivise construction jobs unless they were planning to do it anyway,” he said.

He said while he appreciated the scheme was rushed out at the height of the pandemic, it would have been more beneficial if broader parameters were set.

“It really would have worked if there was cooperation between the government and banks,” he said. “If it worked like the first-home owner grant, that would have made a massive difference.

“The funny thing is that agents have been advertising that these grants work together but they don’t.”

Domain reported earlier that unregistered land and house packages are being discounted on account that buyers can access the $25,000 in time.

Foster Ramsay Finance principal Chris Foster-Ramsay said the scheme would wreak havoc on many buyers down the track who had banked on the money.

He said many hopeful home owners were being sold the dream of home ownership but would run the risk of slipping land valuations or falling short of their deposit.

“There is no doubt in my mind that it is going to be problematic and I have started to move away from house and land packages because of valuation issues, but also because of the complexities around the HomeBuilder scheme.”

Brisbane-based Hunter Galloway mortgage broker Jayden Vecchio said the scheme would have allowed more people to enter the market if it had been set up like the first-home owner grant.

“Had it been set up the other way, it would have enabled more people and first-home buyers into the market,” he said.