Tens of thousands more Australians will get a helping hand from the government to enter the housing market as the government announces an extension to the popular First Home Loan Deposit Scheme (FHLDS) with a new scheme arrival called the Regional Home Guarantee.
Not only has the government increased the number of places on the FHLDS from 10,000 to 35,000 spaces for the next financial year, they have created an additional 10,000 places to encourage buyers to find their home in the regions, rather than metro areas.
Regional Home Guarantee available to previous home owners, not just first home buyers
The kicker with the Regional Home scheme is the fact that you don’t have to be a first home buyer to secure a place on the scheme.
People who have not owned a property in the last 5 years will also be eligible for the Regional Home scheme, giving buyers a second chance at getting back into the property market with only 5% deposit.
That means couples where one person is not a first home buyer, and not eligible for the FHLDS, can still access a government scheme where the remaining 15% deposit is guaranteed by the government, ultimately avoiding costly Lenders Mortgage Insurance (LMI).
We take a look at how each of the scheme’s differ;
See notes below for more details
Housing affordability at 75 year low
Housing affordability has been increasingly difficult over the last 20 years and for many it seems near impossible to own a home of your own.
Whilst there have been inquiries into housing over the last two decades and no end to the number of politicians who think they have a viable solution, like replacing one off stamp duty with an annual land tax – it’s only when you see the industry close up that you realise there isn’t an easy fix.
Sure, the additional costs of stamp duty and Lenders Mortgage Insurance are a barrier for entry for many, but it’s not just about the tax (which the government could easily remove completely if they were that concerned), the value of property has increased significantly over the last 12 months.
Contributing factors to property prices skyrocketing and housing affordability issues;
Low numbers of properties available for sale
Increased demand from buyers utilising government deposit schemes
Delays in new homes being built
Reduction in developers building new developments
Rents and cost of living increasing reducing ability to save for a home deposit and cover stamp duty costs
Government deposit schemes are only for owner occupied properties, removing the opportunity for first home buyers to invest in property ‘rent-vest’ and support their mortgage costs.
Property is cyclical but like anything, when the supply and accessibility isn’t available, the costs increase. Just take a look at current petrol prices going bananas due to supply issues.
For the last 12 months, property stock on the market has been at lower levels than previous years, and with many buyers (including first home buyers), trying to get into the market, demand has outdriven supply and property prices skyrocketed.
You’ll see in the table below the difference between stock levels between 2020, 2021 and 2022. Even just a 20% drop in stock on market can drive property prices up.
The good news is, we are starting to see more properties come on the market for sale and less demand as some buyers have reconsidered timing their entry into the property market. The property market is showing some signs of cooling, giving those remaining in the hunt for a property a better chance of securing a property within their budget.
More opportunities for First Home Buyers
Whilst government schemes can contribute to increased property prices, the opportunity for new or previous home owners to get in or back into the property market outweighs the potential downside. As First Home Buyer mortgage brokers, we saw many of our clients secure places on the FHLDS over the last few years, but also many missed out because there weren’t enough places. So, increasing the number of places to 35,000 will be good for many first home buyers.
We also welcome the Regional Home deposit scheme as there are many people out there who aren’t currently in the property market but want to get back in. This could be the motivation they need to secure their own home again.
Talk to a First Home Buyer mortgage broker
With all the government schemes and options, it can seem confusing, so it’s important to speak with a first home buyer mortgage specialist like Mint Equity. Contact us today to discuss your options.
Notes;
For a property to be eligible it must be a 'residential property' - this term has a particular meaning under each of the Schemes, and Participating Lenders can assist if there is any doubt.
Couples are only eligible for the First Home Loan Deposit Scheme or the New Home Guarantee if they are married or in a de-facto relationship with each other. Other persons buying together, including siblings, parent/child or friends, are not eligible for these Schemes.
Applicants can be either first home buyers or previous owners who do not currently own a home. That is, the applicant must not currently have a freehold interest in real property in Australia, a lease of land in Australia or a company title interest in land in Australia.