Federal budget funds will expand the Help to Buy housing scheme. This is how it will work

The federal government says first home buyers will have the opportunity to own properties with lower deposits and smaller mortgages as part of an $800 million expansion of its signature Help to Buy housing program.

The $6.3 billion federal budget policy will increase the scheme's caps on property values and buyer incomes so about 40,000 Australians can enter the housing market, the government says.

"Together, these changes ensure more first home buyers will be eligible for [the] Help to Buy [scheme], with more than 5 million properties in Australia falling under the new property price caps," a government statement said.

"Teachers, nurses, police officers, retail workers and those in the care sector deserve support to enter a challenging housing market. … Help to Buy takes years off the time it takes to save for a deposit."

How does the Help to Buy program work?

The scheme is based on a shared equity platform, in which the government provides first home buyers with a financial contribution to their loan so they can buy a property.

That contribution will account for 30 per cent of an eligible applicant's home loan for an established property and up to 40 per cent for a new build.

The government says the program will see a first-time buyer who has a $519,000 home loan with an average interest rate save about $900 per month on an existing properties or $1,200 a month on a new build.

Help to Buy applications will open later this year, the government says.

"This is part of our efforts to help more Australians buy a place of their own," Treasurer Jim Chalmers said in his budget speech in federal parliament on Tuesday.

Those who are eligible for the scheme will need to earn less than the increased annual income caps set by the government, which are now $100,000 for single applicants and $160,000 for joint candidates.

How high are the Help To Buy property price caps?

Buyers who partner up with the government to secure their first property will be restricted by the value of the home they're buying and its location.

The increase on price caps being introduced by the government has been linked to the average value of a house in each state and territory.

The caps will not linked to each state and territory's average dwelling price, which would restrict applicants from buying more expensive properties.

The government says people who live in Sydney and other New South Wales-based regional centres will be afforded the highest price cap at $1.3 million.

The limit is set at $1 million in Brisbane and Canberra, $950,000 in Melbourne, $900,000 in Adelaide, $850,000 in Perth, $700,000 in Hobart and $600,000 in Darwin.

How much will the Help To Buy program cost taxpayers?

Treasury says the government has committed an additional $800 million to the Help to Buy scheme in this year's budget.

That figure will bring the total amount of taxpayer money being piled into the scheme to $6.3 billion until the 2028-29 financial year.

Treasury has told the ABC that the increase has not resulted from government underspending on the program in the last budget.

Instead, the government says the extra funds will cover the increased number of Australians expected to apply for the Help to Buy program due to the higher property price and income caps.

The total $6.3 billion figure could also be revised down in future budgets if applicants choose to buy cheaper homes, the government says.

What else is the government doing for housing?

The government says it has set "an ambitious national target" to build 1.2 million new homes over the next five years, inclusive of a pipeline of 55,000 social and affordable properties.

That plan is estimated to cost a committed total of $21 billion, inclusive of $4.5 billion given to states and territories to address current infrastructure backlogs and issues surrounding the delivery of new homes.

The budget also says $54 million will be spent on modernising the manufacturing of homes.

That means $49.3 million will go to states and territories to "supercharge" prefabricated and modular home constructions, and $4.7 million will be dedicated to developing a nationwide certification profess to streamline build approvals.

Another $9.3 billion will be spent on combatting homelessness with crisis support and social housing, while $6.2 million will be spent on research and advocacy on issues surrounding homelessness.

Government to ban foreign investors for two years

Replicating a policy originally announced by the Coalition, the federal government has committed to banning foreign property investors — including temporary residents and foreign-owned companies — from buying Australian dwellings for two years from April 1.

The only exceptions that will be afforded to foreign buyers will include investments that significantly increase housing supply, that support the availability of housing on a commercial scale, or purchases by companies to house workers, the government says.

The Australian Taxation Office will be given $5.7 million until 2029-30 to enforce the ban, and an additional $8.9 million over that period for a new audit program and a crackdown on land banking.

"The ban will mean Australians will be able to buy homes that would have otherwise been bought by foreign persons, while encouraging foreign persons to boost Australia's housing supply," the government said in the budget papers.

"The enhanced compliance approach by the ATO and Treasury to target land banking will ensure foreign investors comply with requirements to put vacant land to use for residential and commercial developments within reasonable timeframes."