Master Builders Secures Massive Housing Stimulus
Master Builders SA has secured a massive win for residential building.

The Morrison Government’s “HomeBuilder” program, announced today, will provide eligible owner-occupiers (not just first home buyers) with a grant of $25,000 to build a new home or substantially renovate an existing home.

In the past month Master Builders SA advised members that cash grants for building new homes and renovations were the top two priority areas for our advocacy to help residential building through the economic challenges presented by COVID-19. Today, the Morrison Government has announced they will do both. Make no mistake, this is a massive win for the industry!

Summary
  • HomeBuilder is a time-limited and demand-driven grant program to help the residential construction market to get through the COVID-19 pandemic.
  • HomeBuilder will provide eligible owner-occupiers (not just first home buyers) with a grant of $25,000 to build a new home or substantially renovate an existing home where the contract is entered into between 4 June 2020 and 31 December 2020.
  • Construction of a new home or substantial renovation must be contracted to commence within three months of the contract date.
  • Consistent with the Morrison Government’s principles, the Scheme will be implemented through existing systems being the States’ respective Revenue Offices.
  • HomeBuilder will complement existing State and Territory First Home Owner Grant programs, stamp duty concessions and other grant schemes, as well as the Commonwealth’s First Home Loan Deposit Scheme and First Home Super Saver Scheme.
Economic impact
  • This measure is expected to have a cost up to approximately $688 million.
  • HomeBuilder is about creating jobs and helping support more than 1 million builders, painters, plumbers and electricians across the country.
  • The program is demand driven so final program costs will depend on actual take-up of the grant and may differ from these estimates as HomeBuilder is an uncapped and demand-driven program.
  • Administration costs associated with the implementation of HomeBuilder are expected to be absorbed by states and territories.
Eligibility

To access HomeBuilder, owner-occupiers must meet the following eligibility criteria:

  • you are an individual, not a company or trust;
  • you are aged 18 years or older;
  • you are an Australian citizen;
  • you meet one of the following two income caps:
  • $125,000 per annum for an individual applicant based on 2018/19 tax return or later; or
  • $200,000 per annum for a couple based on your combined on 2018/19 tax return or later;
  • you enter into a building contract between 4 June 2020 to 31 December 2020 to either:
  • build a new home as a principal place of residence valued up to $750,000 (including land); or
  • substantially renovate your existing home as a principal place of residence, with renovations valued at between $150,000 and $750,000 with the dwelling not valued at more than $1.5 million before the renovation;
  • construction must be contracted to commence within three months of the contract date.
Implementation criteria
  • The respective revenue offices of each of the States will implement the Scheme and will use existing mechanism to mitigate the chances of fraud occurring.
  • Owner-builders and those seeking to build a new home or renovate an existing home as an investment property are ineligible for HomeBuilder.
  • Funding will go directly to individuals, not the contractors, and the individuals are committing a significant amount of investment themselves that this grant will complement.
  • The forecast for the market means contractors will be operating in an environment with strong competition for work, ultimately helping drive lower prices.
  • Renovations or building work must be undertaken by a registered or licenced building service ‘contractor’ (depending on the state or territory you live in) and named as a builder on the building licence or permit. They must have held the building licence or endorsed contractor licence before the date of announcement.
  • The registered or licensed builder (depending on the state or territory) must demonstrate that the contract price for the new build or substantial renovation be no more than a comparable product (measured by quality, location and size) as at 1 July 2019, if requested by the purchaser.
  • In negotiating a building contact, the parties must deal with each other at arm’s length;
  • This means the contract must be made by two parties freely and independently of each other, and without some special relationship, such as being a relative.
  • The terms of the contract should be commercially reasonable and the contract price should not be inflated compared to the fair market price.
  • As part of the National Agreement, program compliance will be monitored by state and territory revenue offices.
  • HomeBuilder will be non-taxable – consistent with existing state and territory First Home Owner Grant programs.
How does this differ from grants offered during the GFC?

HomeBuilder will contrast from GFC programs, such as ‘pink batts’ by;

  • Using existing systems of delivery through state and territory revenue offices,
  • Renovations or building work must be undertaken by a registered or licenced building service ‘contractor’,
  • Limited term – program runs until 31 December 2020,
  • Tighter eligibility through price and income caps,
  • Established dwellings excluded.
What can be renovated using HomeBuilder?
  • The renovation works must be to improve the accessibility, safety and liveability of the dwelling.
  • The renovation can be a combination of works (ie kitchen and bathroom renovation) but must be under the supervision of a registered or licenced builder.
What cannot be renovated using HomeBuilder?
  • Homebuilder cannot be for used for additions to the property that are unconnected to the principle place of residence such as swimming pools, tennis courts, outdoor spas and saunas, and detached sheds or garages.
Timing and how to apply
  • More information on HomeBuilder, including eligibility, can be found on the Treasury Coronavirus Economic Response website.
  • People will be able to apply for HomeBuilder when the relevant State or Territory Government that they live in, or plan to live in, signs the National Partnership Agreement.
  • States and Territories will backdate acceptance of HomeBuilder applications to 4 June 2020. Applications will only be accepted up to and including 31 December 2020.
  • Information on when and how you will be able to apply through Revenue SA will become available in due course.
Need for support in residential construction sector
  • New dwelling commencements are expected to decline by 50 per cent by the end of the year.
  • Pre-COVID, the residential construction sector forecast commencements of 171,000, compared to a forecast of 111,000 post-COVID commencements.
  • A shortfall of 30,000 new dwelling commencements for the second half of 2020 needs to be addressed.
  • Industry estimates a contraction of more than 50 per cent in the volume of new building work and the cancellation rate now exceeds 30 per cent, in comparison to the GFC which saw only 17 per cent cancellations.
HomeBuilder help supports the residential construction sector
  • HomeBuilder looks to help addresses the significant, sharp decline in the construction pipeline from the third quarter of 2020 as a consequence of subdued residential construction demand since March 2020.
  • HomeBuilder gives owner occupiers an incentive to enter the market now.
  • HomeBuilder is time limited to help the residential construction sector to support the sector get to the other side.
Impact on house prices and renovation costs
  • Consultation with industry suggests that pricing is very competitive due to the forecast downturn in commencement, coupled with the forecast lack of demand.
  • This is a short term, targeted program so developers won’t be able to capitalise the grant into their price.
  • As HomeBuilder can only be used to construct new or substantially renovated properties, its eligibility criteria manages the risk of longer term affordability challenges by increasing supply.

For official Federal Government information on HomeBuilder see https://treasury.gov.au/coronavirus/homebuilder

With these fantastic grants and record low interest rates, now is definitely the time to pull the trigger on that new home or renovation you’ve dreamed about! Make sure you choose a builder or tradie you know you can trust and request a quote today using the Master Builders SA Building Directory – http://www.sabuildingdirectory.com.au/