Analysis: The Federal Budget hasn’t delivered for first-time buyers, or the Gold Coast

There are some fundamental flaws with the government’s home guarantee scheme that may end up hindering rather than helping first-time buyers on the Gold Coast.

Federal treasurer Josh Frydenberg delivers the Budget which had little in it for property buyers. Photo:Getty Images

OPINION: The Federal Budget has been delivered but, let’s face it, there wasn’t a lot in there related to the property market.

For the most part, nothing will change. Housing supply will continue to outstrip demand; building costs will continue to rise; finding construction workers will remain a challenge; and renters will continue to face the very real struggle of keeping a roof over their heads as the Coast’s vacancy rate continues to tighten.

Affordability will remain a serious issue, unless, of course, you happen to be a first-time buyer.

First-time buyers need to enter the home guarantee schemes with their eyes open or they could end up in financial difficulty.

For this demographic, Christmas has, apparently, come early, with the government announcing it will inject $8.6bn into expanding its Home Guarantee Schemes for the next three years, raising the number of available places to 50,000 annually, 35,000 specifically for first-time buyers.

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Under the scheme, these buyers can purchase a home up to the value of $600,000 with as little as a 5 per cent deposit and if they are a single-parent they need as little as 2 per cent. The government will go guarantor for part of the loan and borrowers can forgo paying lenders mortgage insurance.

It sounds like a winning combo, and the prime minister Scott Morrison looked genuinely pleased with himself when he announced that “more people will be able to own a home sooner”.

Generally, industry bodies welcomed the announcement, but many felt it did not go far enough.

Prime minister Scott Morrison said “more buyers will be able to own a home sooner”, under the scheme extension, but at what cost?

While the scheme has helped almost 60,000 thousand people on to the housing ladder since it was introduced in 2020, there are some fundamental issues that the government seems to have overlooked.

For starters, the median house price on the Gold Coast sits at almost $900,000, well above the scheme’s $600,000 threshold. So there will be a limited number of properties in the region that will qualify.

By not increasing these thresholds, all the government is doing is making more people fight over an ever-shrinking pool of properties.

The government talks about increasing affordable housing, but where exactly are these “affordable” houses coming from? If they do not already exist, then they have to be built. If they have to built, where are they to be built when developable land on the Gold Coast is scarce? And who is going to build them at a time when developers are going bust because of the soaring cost of construction?

First-time buyers can purchase a home up to $600,000 under the scheme, yet the Gold Coast’s median house price is $900,000. This means more buyers will be forced into the apartments such as this one at 21/1374 Gold Coast Highway, Palm Beach.

The government seem to have not considered any of these things.

On top of this, buying a property with as little as 5 per cent deposit is risky business in anyone’s books.

Financial comparison website RateCity.com.au advises anyone thinking of going in for the scheme to “do so with their eyes wide open”.

“While most new buyers should be able to ride out a drop in the property market, anyone who hits a rocky patch with no buffer, might not be able to make their monthly repayments and risk losing their home,” RateCity’s research director Sally Tindall said.

“Purchasing a property with a small deposit might help people buy sooner, but the ramifications of taking out a larger loan should be carefully considered.

“Buying with a 5 per cent deposit means a person’s loan size is significantly larger than if they had bought with a 20 per cent deposit. This means when interest rates rise, their repayments will go up by more. If property prices then drop, people using this scheme are also likely to be locked into their lender and their guarantor for longer.”

First-time buyers, you have been warned.