Federal housing support schemes expanded as deposit hurdle grows

• The Federal Government announces an additional 30,000 places in its housing support programs
• Domain research says the time it takes for a young first-home buying couple to save for a 20 per cent deposit has increased by up to nine months
• From July 1 the First Home Loan Deposit Scheme, the New Home Guarantee scheme and the Family Home Guarantee will all be increased
• Ten thousand guarantees will be made available to eligible single-parent families to build or purchase a home with a deposit of as little as two per cent
• The government also announced new property price caps under the First Home Loan Deposit Scheme

The Morrison Government will release an additional 30,000 places in its housing support programs as the time it takes first-home buyers to save for a deposit increases.

From July 1, Housing Minister Michael Sukkar said the First Home Loan Deposit Scheme, the New Home Guarantee scheme, and the Family Home Guarantee would all be increased.

Ten-thousand guarantees will be made available to eligible single-parent families under the Family Home Guarantee to build a new home or purchase an existing home with a deposit of as little as two per cent.

The New Home Guarantee, an expansion of the First Home Loan Deposit Scheme, will provide an additional 10,000 places for first home buyers seeking to build a new home or purchase a newly built dwelling with a deposit of five per cent and a construction commencement timeframe of 12 months.

“A total of 30,000 first home buyers have been supported into home ownership through First Home Loan Deposit Scheme and New Home Guarantee already,” Minister Sukkar said.

“We know how difficult it can be to buy a new home or re-enter the housing market, and that saving a deposit is the hardest part of getting into home ownership.”

Saving for a deposit is only getting more difficult as prices continue to rise across the country.

The Domain First-Home Buyer Report said couples aged between 25-34 years faced an average of 4.8 years to save a 20 per cent deposit.

The report considered only entry-priced homes, which are based on the 25th price percentile of the housing market that is deemed to be more in line with a first-home buyers’ budget.

For buyers in red hot markets the deposit saving time is longer, with Sydney at 7.1 years, Melbourne at 6.1 and Canberra at six. More affordable regions include Perth at 3.7 years and Darwin at 3.8.

Most capital cities recorded a two to nine-month increase on last year in the time required to save a house deposit.

Mr Sukkar said the First Home Loan Deposit Scheme lowered a key entry barrier for first home buyers.

“It brings the deposit hurdle down to five per cent with a Morrison Government guarantee, enabling … first home buyers to get into the market many years in advance of when they would otherwise or, in some cases, getting in when they would otherwise never be able to save up the required deposit,” Mr Sukkar said.

When asked about the potential for interest rates increases at a doorstop interview, Mr Sukkar said banks would lend only to customers who were reasonably able to fulfil the mortgage.

“There are income buffers, there are interest rate buffers that are applied to all home loan applications, so we have a very rigorous process,” he said.

“In the end, the Australians who obtain a guarantee are people who can meet all of those credit requirements.”

Domain senior research analyst Nicola Powell said the First Home Loan Deposit Scheme allowed access to the property market sooner.

“Utilising this scheme supercharges the speed to market, reducing the savings time to less than two years for an entry-priced house across all capital cities, with Perth recording the quickest time to save at only 10 months,” Dr Powell said.

“Most capital cities saw the timeframe required for an entry-priced unit drop to under a year, apart from Sydney at one year and four months.”

However Dr Powell said a lower deposit could increase the cost of a home loan over its lifespan and owning only five per cent in equity could place the borrower at risk of negative equity if prices declined.

“The report confirms an extensive amount of time is needed to accrue a savings pot large enough for a 20 per cent deposit on an entry-priced home,” she said. “Across many cities this has blown out over the past year for entry-priced houses but has remained fairly stable or reduced for entry-priced units.

“For some, it becomes a matter of compromise on property type or location, or even becoming a rentvestor (someone who rents where they live and buys where they can afford). 

“Reflecting on the extensive time it takes to save a deposit, first-home buyers are likely to have a sense of urgency and this could mean compromising on their ‘ideal home’ to mitigate missing out.”

Shalika Perera, a recipient of the Family Home Guarantee, said the scheme had made her ‘dream come true’.

“We have the opportunity to enjoy the new homes and comforts with our children which we may never have been able to,” she said.

“It’s like a miracle for me, I never ever thought that this kind of thing would happen because life has been so hard and very busy but finally I’m there.”

The government also announced new property price caps under the First Home Loan Deposit Scheme (see table below).

The extension has been welcomed by industry groups, with HIA chief executive industry policy Kristin Brookfield saying the price cap increase “made good sense”.

“Increasing the price caps for this next tranche is an important recognition that house prices have been changing due to the impacts of the pandemic,” she said.