It really does feel like the real estate market has given a collective sigh of relief, with the coalition retaining power.

Irrespective of your political views, the uncertainly surrounding the impact of Labor's policies on negative gearing and capital gains tax were causing nervousness in the real estate market. This was being reflected in prices continuing to remain sluggish or even fall further, during the first few months of this year.

But within what seems to be mere days of the election taking place, agents are reporting that buyers are back and there is more confidence in the market.

Changes in the wind

APRA (the banking regulator) has also come out to say they are considering scrapping a rule requiring mortgage customers' lending capacity to be assessed at an inflated interest rate of a minimum 7%.   This was introduced in 2014 to allow a buffer to ensure home borrowers could service the loan when rates rose.

The inability of many buyers to secure finance was a major cause of the market drop we have experienced over the past 18 months, so this is good news for buyers hamstrung by an inability to meet this higher loan servicing bar.

Add to this the likelihood of the RBA cutting rates when they meet again in June (with some saying a second rate cut will follow later in the year) and we are seeing far more confidence in the real estate market.

First Home Loan Deposit Scheme (FHLDS)

Another announcement by the coalition (matched by Labor) on the doorstep of the election offered to help first home buyers get into the market. 

The First Home Loan Deposit Scheme helps eligible first home buyers purchase a house with a deposit as low as 5%, as the government will provide a guarantee for 15% of the loan. First home buyers with an income of up to $125,000 (or $200,000 for a couple) will be eligible, saving around $10,000 in Lenders Mortgage Insurance.

The scheme is limited to 10,000 first home buyers and the value of homes eligible for purchase will be determined on a regional basis. The scheme starts on 1 January 2020.

But others have pointed out potential flaws with the scheme. 

Buying a home having only put in 5% of the home value presents the danger of the home buyer paying thousands more in interest to the bank over the life of the loan.   The scheme also assumes that banks will provide finance to prospective purchasers. Some may choose to do so at a higher interest rate to offset any perceived risk. 

Curiously, no banks were consulted about the scheme prior to it being announced.

Whilst schemes to help first home buyers and others in the housing arena are to be applauded, those Government Schemes need to be effective. Anyone remember NRAS?  Let's see how the FHLDS plays out.