NSW first home buyers could use contribution from the state government for their deposit

First home buyers in NSW will be able to use a contribution from the state government for their house deposit under a new scheme to aid the affordability crisis.

First home buyers in NSW will be able to use a contribution from the state government for their house deposit in return for handing over some equity in the property.

The Sydney Morning Herald reports that the scheme, under Premier Dominic Perrottet, will help address Sydney’s affordability crisis, and the equity – the difference between the value of your home and how much you still have left to pay on your mortgage – held by the state would be repaid in instalments or when the property was sold.

The scheme would include equity against an existing home, land on which a homebuyer builds a home, or equity against the home of a guarantor. Parents of first home buyers could also hand over equity in their homes to the state government help their children buy a property.

Final details of the policy – including whether there’d be a cap on the amount the government would contribute or the price of the property or land – are still being worked through.

Mr Perrottet said the government had a responsibility to develop better ways to help people enter the property market.

NSW Premier Dominic Perrottet said his government has a responsibility to develop better ways for people to enter the property ladder. Picture: NCA NewsWire/Damian Shaw

First-home buyers in NSW will be able to use a contribution from the state government for their house deposit in return for handing over some equity in the property. Picture Gaye Gerard/NCA NewsWire

“Increasingly younger generations think being able to buy their first home is unachievable, and for me, that’s unacceptable,” the Premier said.

“As a parent, I would happily sacrifice some equity in my home if I knew it would give my kids a foot in the door to our state’s property market.”

The looming housing affordability crisis – a key focus for Mr Perrottet – will likely be a “significant concern” ahead of next year’s election, Tom Forrest, the CEO of Urban Taskforce, one of the leading bodies for property developers, previously warned.

Referring to ABS statistics at the time that showed approvals had plummeted in late 2021, Mr Forrest called it “a clear warning” for the Premier “that as he focuses on economic recovery in the post-Covid period, there needs to be a very clear focus on flexibility in the planning system and the delivery of housing supply”.

Analysis from Moody’s Investors Service in October last year found that housing affordability has deteriorated to its worst level in a decade in Sydney, despite record low interest rates, with the median house price hitting $1.3 million.

This means a household with an annual income of $135,000 will spend more than 45 per cent of their money servicing their new mortgage, a dramatic increase from February where they needed 36 per cent of their income.

Housing affordability has deteriorated to its worst level in a decade in Sydney Picture: NCA NewsWire/Nikki Short

In more bad news, Sydney will likely reach its worst housing affordability in a decade if prices rise further by a relatively small amount as low interest rates are not enough to offset sharp house price gains, according to Moody’s.

“In Sydney, house affordability is at its worst than at any time in the past decade. Based on our modelling, Sydney will reach its worst housing affordability in 10 years if prices increase by 4.6 per cent or if average mortgage lending rates rise by just 0.42 percentage points to 3.87 per cent,” said Pratik Joshi, a Moody’s Analyst.

“Australia on average would reach its worst affordability in a decade if housing prices increase by 15 per cent or if the mortgage lending rate rises to its average for last 10 years of 4.79 per cent.”

NSW Treasurer Matt Kean said home ownership was “one of the biggest intergenerational challenges of our time”.

“We need to make sure that every Australian who works hard to get ahead can buy a house, because buying a house is more than owning a home, it is about buying a stake in the future of our country,” he said.

“Home ownership is a problem that is going to take time to address which is the very reason why we need to start now.”