First Home Property Spike

The federal government’s first home loan deposit scheme is set to drive up prices in some segments but create value in the other property segments that do not qualify for government assistance

Already 3,000 potential first homebuyers were registered by banks in the scheme’s first month –  January.  At Origin Finance, our conversations with CBA and NAB show a huge demand for the scheme, with bank staff inundated with applications

And with so many places going like hotcakes in the first month alone, that leaves only 7,000 till the end of June

From February, 25 smaller lenders will also be able to arrange finance under the scheme.

Eligible borrowers will be able to buy a house, apartment or a house-and-land package with a deposit from between 5 and 15 per cent of the property’s value, compared to the usual 20 per cent, without taking out lender’s mortgage insurance

Under the scheme, a home loan of $570,000 on a $600,000 property will save the buyer about $25,700 in mortgage insurance. In this case, the buyer has a $30,000 deposit rather than the usual required $55,700.

But there is concern that the scheme will drive up the prices of properties

Maximum property purchase prices for the scheme vary between cities. For example, Sydney is capped at $700,000, Melbourne $600,000, Brisbane $475,000 and Adelaide $400,000.

In the past, the price of smaller units – typical of those demanded by first home owners get driven up by such schemes.

Meanwhile, prices of those larger units, priced just above the scheme’s maximum price are set to stagnate.  Starved of a stimulus, their prices tend to go sidewards and can often represent better value for money. The First Home Owners Deposit Scheme may well save some buyers money – but not using the scheme

If you want to understand more how the first home deposit scheme works, please contact your Origin broker 0n 1300 30 67 67.