Tasmanians to get up to $36,000 boost in homebuying power from stage 3 tax cuts
How much difference does a few days make? It could be tens of thousands of dollars as tax cuts are set to increase borrowing power — see how much.
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STAGE 3 federal government tax cuts are just around the corner and expected to have multiple effects on the housing market.
For some, it could mean access to the funds that will get them across the line and into a new home. And suburbs that were just out of reach, may become an option.
For others, the extra borrowing power might sound good on paper, but in reality would push the family budget into stress.
Based on an average Tasmanian before-tax income, $86,840 — and annual $21,840 annual expenses — Canstar research shows a single person could borrow up to $313,000. With a 20 per cent deposit, they could buy a $391,250 home.
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From July 1 when the tax cuts come into effect, this buyer’s borrowing capacity will increase by $14,000 to $327,000, making a home worth up to $408,750 within their reach, with the same deposit.
That’s a $17,500 increase in purchasing power.
For dual-income families, the purchasing power increase is $25,000 for those with a full-time and a part-time income, or $36,250 for those with two average incomes.
For a one and a half income family, with annual expenses of $31,670, their borrowing power will shift from $516,000 to $536,000, and their purchasing power with a 20 per cent deposit, from $645,000 to $670,000.
The borrowing capacity for dual-income families will increase from $742,000 to $771,000 and, with a deposit, they could buy a home worth $963,750, up from $927,500.
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Canstar’s research shows a Tasmanian home loan over $330,493 would put a single buyer into mortgage stress, where a borrower is spending more than 29.99 per cent of their gross income on loan repayments.
Loans in excess of $495,739 present the same problem for the 1.5 income families, while $660,986 is the tipping point for double-income buyers.
The calculations are based on the average owner-occupier variable loan on Canstar’s database with an 80 per cent LVR 30-year loan and a 3 per cent interest rate buffer.
Canstar group financial services executive Steve Mickenbecker said low incomes in Tasmania were a big issue.
“It’s quite a problem that the average income is well below the other states,” he said.
“Tasmania is about $10,000 below almost all the other states, excluding South Australia, and even further behind WA and ACT, which means that Tasmanians can borrow a lot less.
“Maybe five or 10 years ago that would have been okay, but now in Hobart it is really not enough.”
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Mr Mickenbecker said years of surging Hobart’s property prices had taken their toll.
“Hobart has fallen further behind most states in buying power,” he said.
“It’s not as tough as New South Wales, but that lower income level really hurts Tassie when there are booming prices.
“Even for couples who can afford to borrow $963,750, it’s easy to spend that much and a lot more in the Hobart market.”
Analysed against PropTrack median prices, the $17,500 increase for singles only adds one suburb, Moonah units, to three that are already under the pricing benchmark, Gagebrook, Herdsmans Cove and Clarendon Vale (houses).
Searching outside the city in the South East region offers little, with the most affordable suburb for units, Huonville, priced at $415,000.
In the next bracket, the increase in purchasing power for 1.5 income buyers will add North Hobart units and Snug houses to their possibility list. However, buyers in this range have access to 26 suburbs (houses) plus 28 (units).
For dual income buyers, the increase of over $36,000 only adds Mount Nelson to the list of places to buy a typical median-priced house. There are just nine greater Hobart suburbs out of reach for buyers at this level.
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Originally published as Tasmanians to get up to $36,000 boost in homebuying power from stage 3 tax cuts
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