The Australian Government has announced the “HOMEBUILDER” construction stimulus package of $25,000 for homeowners planning their renovation or new build.

Do you qualify for HomeBuilder?

The main details are:

• it’s handled by the State Governments
• it’s means tested ($125K for singles, $200K for couples – and you have to submit FY18/19 tax returns to show)
• only owner-occupier, principal place of residence properties
• renovations are $150K – $750K, for properties with valuations under $1.5M
• new builds are $750K for house and land (and it’s the current land valuation if you already own it)
• interestingly, a knock-down/rebuild qualifies as a ‘substantial renovation’
• applies to contracts signed between 4 June and 31 Dec and work has to commence on site within 3 months of contract date
• no owner builders, and licensed builder can’t be a family member
• renovations have to improve the accessibility, safety and liveability of the dwelling. 
• it cannot be for additions to the property such as swimming pools, tennis courts, outdoor spas and saunas, sheds or garages (unconnected to the property)
• it’s not taxable
• it can be combined with the First Home Buyer’s / Owner’s Grant and stamp duty concessions in your State, plus the Commonwealth’s First Home Loan Deposit Scheme and First Home Super Saver Scheme

This scheme will be available to those renovating, buying a house-and-land package, building a new home on an existing site, and also buying an apartment off-the-plan.

However, what I’m seeing is that homeowners may meet certain criteria (timing and contract price), but then fall over on means testing or property valuation.

Especially if they’ve owned their land for a while, or are on larger rural or regional properties with lots of ‘land’ beyond the house site (and fail the $750,000 TOTAL valuation of house and land).

Strangely, if they are knocking down to rebuild a new home, that valuation limit increases to $1,500,000 (as a significant renovation).

And many say they didn’t plan to spend $150,000 on their renovation project (or wonder how you can afford to, and still sit under the means test criteria).

It’s only available to Australian citizens who are over 18 (there’s a few tax-paying, Australian resident Kiwis that have got in touch with me about this one).

I thought this was interesting (and I completely disagree with part of this statement) …

“HomeBuilder will help to support the 140,000 direct jobs and another 1,000,000 related jobs in the residential construction sector including businesses and sole-trader builders, contractors, property developers, construction materials manufacturers, engineers, designers and architects.” [SOURCE]

My take is that this incentive package (renovations aside) will most significantly help the volume builders / project home builders who have a business model that enables them to execute contracts on off-the-shelf designs, and can mobilise on site quickly within the small-window timeframe.

That model helps the volume builders, the supply chains of their trades / subbies / suppliers …. but doesn’t do much beyond that 6 month window in the industry at large.

You may, if building a custom home or doing a renovation, fortuitously have a window of opportunity to capitalise on this if:

+ your project is already underway in design

+ your designer can resolve things quickly

+ you can get your approvals quickly

+ you’ve done what you need to during the design phase to be sure you’re on budget so you can commit to a contract confidently

+ you can lock in a builder who can start before 31 March 2021

+ you meet all the means testing, project value and property valuation critera

I think, sadly, this scheme misses an opportunity to incentivise much needed sustainability improvements to existing housing.

The Australian Institute of Architects and other industry bodies put forward proposals of this nature. 

Given that the average new home has an energy efficiency star rating of 6.1 stars, but our existing homes average at 1.7 stars energy efficiency rating, you can imagine the impact of improving their energy efficiency with targeted renovations and improvements.

You’d help the industry, you provide growth opportunities in new, climate-friendly industries, you lower the energy drain on our infrastructure, and put money back into the hip pocket of homeowners through lowered energy bills. 

And of course, many are disappointed that social housing hasn’t been taken into account.

And if the aim was to stimulate the whole industry, I believe it’s missed the chance to help people get started on longer-tail projects.

Projects where the design process and council approvals may take 12 – 18 months to get through, but you’d see cash getting injected into the industry over the next 2 to 3 years, rather than the next 6 months only.

Linking it to building contracts, while easily traceable, means it actually incentivises the speedy COMPLETION of projects … not the intentional COMMENCEMENT of projects.

And whilst it helps builders, tradespeople and materials suppliers, there are a significant raft of additional consultants, professionals and providers who simply won’t factor in the workflow required to deliver to these deadlines.

They’ve cited the decline in building approvals as a reason for needing this … so I actually wish the scheme had been linked to those (or even council lodgements) as opposed to contract starts.

We run into dangerous territory where less scrupulous operators drive up prices as people push and race to get their contracts signed within the timeframe, and people making decisions in haste … which is never good when building and renovating.

And you’ll see huge pressure on the industry generally, as everyone races to meet the criteria of a site start before 31 March 2021 (that’s the last extent of work commencing 3 months from 31 December).

This scheme may actually end up hurting many homeowners who simply wanted to build or renovate, as the industry frantically deals with the fall-out of urgency to meet timelines and targets.

Volume builders will most likely woo the first home buyers in areas where a new house and land package is available for under $750,000.

However, the volume of work they do as a result will have an impact on supply chains, subcontractor availability and pricing across the industry.

I’d be remiss if I didn’t say this:

Racing into your project, making mis-steps and hurrying through contracts, selections, drawings etc, can easily overspend $25,000 in variations down the track.

And the pressure that’s about to be put on the industry to deliver according to this timeframe, could easily see $$$ increases through the pipeline of manufacturers / suppliers / subcontractors and trades.

Do a jig if you’re about to sign a contract and meet all the criteria.

Otherwise, tread carefully. Stay informed and proactive.

If you haven’t started your project, and you were planning a renovation or a new, custom-designed home, I wouldn’t recommend using this as a reason to start (and race to the deadline).

You may meet the timelines in getting designs and approvals done within that period, however the kicker may be locking in a builder (with a signed contract) who can start before March 31, 2021 … or the privilege you pay in extra $$ to make that happen.

The State Governments will be processing the applications for these grants.

In addition, there’ll need to be some assessment to determine that renovations meet the eligibility criteria in improving ‘accessibility, safety and liveability of the dwelling’. I look forward to seeing what that is.

In the meantime, there is loads here on Undercover Architect to help you. Specific resources to check out:

This podcast will help you learn more about the contract process of signing with a builder (from a legal perspective) >>> INTERVIEW WITH LAWYER DESPINA PRIALA

Podcast Season 7 is all about the build process >>> START SEASON 7 HERE

And ‘Manage Your Build’ is my fantastic online program to assist with understanding the contruction phase, so you know what to anticipate, when to make decisions, and how to ensure you’re getting what you’re paying for >>> MANAGE YOUR BUILD

We’ll continue to update this post as more information becomes available.

The Treasury has a range of scenarios and FAQs available on downloadable PDFs here: HOMEBUILDER

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