Buying a house with just 2% deposit

sounds unbelievable doesn't it? Well it isn't unbelievable if you believe the government and you fit their criteria.

Yes, there is a catch - more than one catch in fact. The government's "Help to Buy" scheme is not what it appears to be. 

First of all you need to have saved for the deposit of course. Fair enough. Some people will manage that.

Then you need to be earning a certain amount of money.  A single could earn up to $90,000pa and a couple up to $120,000pa. A house up to $600,000 in value was the cut off point.  

There is an election coming up and there is a budget being brought down on Tuesday. Guess what? Yes, the single can now earn up to $100,000pa and the couple up to $160,000. A house up to $900,000 in value is now the cut off point.

But then comes the real issue. The government will own 40% of the house value and they will call it in when the house is sold. They will benefit from any improvements made. No, you can't pay it off gradually over your lifetime. It is only for that house. You must be the person or people who occupy that house. If you need to move for some reason too bad. 

There are all sorts of other issues as well, issues the government is carefully not telling you about. They are not being generous at all. It may appear that way and for a single person who never marries and never leaves the property it may be a good choice. For a couple who have children and want a bigger place or divorce or both it may be a very poor choice. 

There are all sorts of issues with what is effectively co-ownership here. Any idea that the costs of co-ownership will be equally shared is something that needs to be forgotten. Whatever the government tells us now is something that can be changed in the future. This is being done as an investment for them. 

If you have any doubts about that then perhaps the plan to invest in more "flatpack" houses that can be transported to the site will help to convince you. Yes, it is the land value the government is interested in. They will be happy to see substandard housing put on sites knowing that the value of the land is going to rise.  

You doubt that? The government is currently trying to acquire a house close to one of our suburban shopping centres. It is an old fibro-asbestos house which is still just fit to live in. The owner is in a nursing home and her partner, a much younger person, still lives in the house. The government wants to acquire it for the land and they are "offering" something which is well under what the land is worth. It is being done precisely for the purpose of the above scheme and more than one dwelling will be put on the property. The owner cannot subdivide but the government can.

Too many people are desperate for housing. The scheme will seem like the answer to the dream of home ownership for many. Will it work? It might - but read the fine print and consider the long term consequences.