How tough is it for first-time buyers?

By Graeme Salt

According to the Real Estate Institute of Australia (REIA) the national median house price grew by 7.6 per cent over the year to March, 2024 increasing to $1,026,903.

Is it any wonder that younger people are having trouble getting on the property ladder?

And, at $1,627,625 the median price for a house in Sydney continues to be higher than that of other capital cities, 58.5 per cent higher than the national median.

Is it any wonder that, capital city properties appear out of reach?

To make it worse, 13 interest rate rises have drastically reduced how much people can borrow.

Yet, first home buyers and still buying – so what are they doing to bridge the gap?

The bank of Mum and Dad

Many parents are aware how tough it is to get on the property ladder and are helping them by gifting them funds towards the purchase.  I recently settled one loan where the clients were gifted $350, 000.

The banks often feel more comfortable when there is a parental gift too as a sizeable cash component makes the loan less risky.

But sometimes parents don’t have access to much cash, though like most Baby Boomers, they have heaps of equity in their home.  In this instance, the parents can offer their property as a security guarantee which can get round the fact that the kids have not been able to save much of a deposit – thereby reducing interest rates and avoiding the children having to pay Lenders Mortgage Insurance.

And some lenders, also have special Parent to Child (P2C) loans which allow the kids to receive preferential loans at lower rates.

State government assistance

There is whole raft of state assistance to make homebuying easier for first-time buyers:

NSW	A $10,000 First Home Owner Grant (FHOG) is available when you buy or build your first new home.
	The NSW Government also doesn’t charge first home buyers stamp duty on properties valued at up to $800,000
QLD	First-time home buyers can get a $30,000 FHOG towards buying or building a new home
	First home buyers receive concessions on transfer duties for properties valued up to $700,000
VIC	A FHOG of $10,000 is available for those buying their first home valued at up to $750,000
	Stamp duty is waived for properties valued up to $800,000
WA	First home buyers can receive a $10,000 FHOG towards buying or building a new home
	No stamp duty is payable on purchases up to $450,000 and there are stamp duty concessions on properties valued up to $600,000
SA	A FHOG of $15,000 is available for those buying their first home
	First home buyers pay no stamp duty on new properties
Tas	First home buyers can receive a $30,000 grant if they are purchasing or building a new home and unlike elsewhere in the country there is no price cap on the value.
	There is no stamp duty paid by first home-buyers on properties valued at up to $750,000.

Federal Government assistance

The First Home Guarantee (FHBG) is part of the Home Guarantee Scheme (HGS), an Australian Government initiative to support eligible home buyers to buy a home sooner. It is administered by Housing Australia.

Under the FHBG, part of an eligible home buyer’s home loan is guaranteed by Housing Australia. This enables an eligible home buyer to buy a home with as little as 5% deposit without paying Lenders Mortgage Insurance.

For the FHBG, any Guarantee of a home loan is for up to a maximum amount of 15% of the value of the property (as assessed by the Participating Lender). This Guarantee is not a cash payment or a deposit for a home loan. Eligibility criteria apply.

Conclusion

It’s tough for first homebuyers at the moment – and it’s not likely to get much easier for a while.  The bottom line is that we are simply not building enough houses.  However, there are multiple ways that things can be made easier for first home buyers – and some of these ways can be used in conjunction with each other, thereby making things much more affordable.

If you want to discuss how these methods can be used, feel free to get in contact with me.

Graeme Salt is an award-winning mortgage broker.  For a no-obligations consultation on your lending needs, please contact him on 02 9922 5055.