First Home Buyer Deposit Scheme

The First Takers of the First Home Loan Deposit Scheme Offer

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You may recall that before the first home loan deposit scheme offer became available, we talked about some of the obvious problems with it and how it has the potential to drive property prices up. 

The figures for the scheme’s first takers are now out, and while there is no data yet as to the impact of the scheme to housing demand, it is clear from this latest data that the initial 10,000 guaranteed loans for first home buyers may be insufficient. 

Under the scheme, 10,000 eligible first home buyers per year need only come up with a 5 per cent of the value of the property as deposit and the National Housing Finance and Investment Corporation (NHFIC) will guarantee the remaining 15 per cent, bringing the total deposit to 20 per cent, the amount of deposit required by lenders.

The scheme effectively eliminates buyers’ Lenders Mortgage Insurance (LMI) and helps buyers get into the property market fast.  

The latest data from the NHFIC shows that more than 5,500 first home buyers have already applied for the First Home Loan Deposit Scheme with the 5,146 of those loans coming from major banks. It’s only February and already the places are halfway filled up. 

Fortunately, the NHFIC has announced that it will release an additional 10,000 more places in July, on top of the 10,000 initially guaranteed loans.

This is good, but at the rate the first home buyers are coming, the initial 10,000 places may long be gone before July arrives to save the day.  

The data also shows what the people are buying as well as the location of the property they are buying.  

70 per cent of eligible applicants bought houses while 26 per cent bought apartments. Major capitals also got a high share of buyers with Sydney leading the way. 

Take a look at the table below. 

 

Related:  More first home buyers are entering the market as housing affordability improves

First Home Loan Deposit Scheme

 

 

It turns out that most of the first home buyers are also single rather than couples or young families that the First Home Loan Deposit Scheme was created to target. 62 per cent of the allocated places were claimed by singles.  

The data also reveals that one-third of the applicants are 25 – 29 years old and that the average income is $67,698 for singles and $110,998 for couples.  

With this data, it’s safe to say that the scheme is effective. It is helping people with lower than average income to get into the property market.  

The question is, how many of those who applied would have been able to buy anyway without the scheme, and how many would have been unable to, without the scheme.  

And the bigger question still is, what is going to happen when the First Home Loan Deposit Scheme maxes out?

With no cap legislated yet, the government may well roll over the scheduled July renewal a few months earlier. And when they do, will they be able to satisfy demand while managing housing supply adequately in order to make significant changes in the market?  

We shall just have to wait and see. 

 

Ed Chan

Co-Founder / Non-Executive Chairman

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