What the new First Home Loan Deposit Scheme means for the property market

Announced first on Sunday by Prime Minister Scott Morrison, if elected the Coalition will implement the First Home Loan Deposit Scheme, which will see selected private lenders offering first home buyers home loans with only a 5 per cent deposit upfront, while also eliminating lenders’ mortgage insurance.

The scheme will be made available to individuals earning up to $125,000 annually or couples up to $200,000, with the scheme available for homes at a pricepoint determined on a regional basis.

Later that afternoon, the Labor Party agreed to match the scheme if it wins the election, essentially guaranteeing the scheme’s future.

Industry reactions

Experts and industry figures have been openly accepting the scheme.

Peter Koulizos, chairman of the Property Investment Professionals of Australia, called it a welcome move, as he and the association previously advocated for bettering first home buyers and their access to their first property.

“It’s certainly a welcome move to be able to be assisting first home buyers without penalising property investors,” Mr Koulizos said.

“Up until the government announced that, all the Labor Party was proposing was to penalise investors through the increase in capital gains tax and changes to negative gearing without directly assisting first home buyers.

“But now, this measure is to be certainly welcomed because it’ll be great for first home buyers, great for the property market and also good for the overall economy.”

He claimed that the scheme will increase demand by a little bit and would improve the property market.

“In the end, people who own property want their property prices to go up, because if you’re paying 4 or 5 per cent interest per annum, well, you want your property value to go up by about that as well, otherwise you’re going to be losing money in the long run,” he said.

Shane Garrett, chief economist of the Housing Industry Association, also said the scheme was welcomed, especially since new data indicated first home buyers are nearly at their largest point for the last seven years, at 27.6 per cent of owner-occupier loans.

Australia-wide, first home buyers made up the largest market share in the Northern Territory at 42.9 per cent of all owner-occupier loans, followed by Western Australia at 26.9 per cent, Victoria at 30 per cent, Queensland at 27 per cent, NSW at 24.8 per cent, the ACT at 22 per cent, South Australia at 21.7 per cent and Tasmania at 20.7 per cent.

“First home buyers are becoming an increasingly vital driver of activity in our housing market, especially with investor activity so quiet,” Mr Garrett said.

“Looking ahead, there is much potential for [first home buyers] to support new home building activity in the years ahead. Our economy has generated over 600,000 new full-time jobs over the past three years – many of whom will want to buy their first home in the near future.

Master Builders Australia and its CEO Denita Wawn believe that the scheme will boost the numbers of first home buyers.

“For many aspiring first home buyers, it is the deposit gap rather than the size of mortgage payments that is the real barrier to home ownership, and we think the First Home Deposit Scheme will help them overcome it.

“We have been calling for measures such as this scheme because this kind of targeted and practical approach will do more to assist first home buyers than doubling capital gains tax and restricting negative gearing.”

Metricon NSW general manager Luke Fryer was in full support of the scheme, claiming it could not come soon enough for first home buyers.

“It’s a master stroke, addressing the major challenges holding Australians back from buying their first home – specifically, the time it takes to save, affordability of what and where they want to buy, and transaction and insurance costs of purchasing property,” Mr Fryer said.

“The fact both major parties have committed to this should give first home buyers confidence that this policy will be introduced.

“It’ll put opportunity back in the hands of buyers who have the proven ability to service a loan but only have the lack of a deposit standing in the way of first home ownership.”