First home buyers using Home Guarantee Scheme on equity growth train: report

First home buyers using the federal government’s low deposit scheme are seeing equity gains in line with long-run averages despite property prices falling for much of last year.

More than 100,000 first home buyers have used the federal government’s low deposit scheme.

First-home buyers using the federal government’s low-deposit scheme are borrowing less and seeing returns despite the softer market, a new report as shown.

Those who purchased with the Home Guarantee Scheme – which allows buyers to get into the market with a deposit as low as 5 per cent – can expect steady equity growth, according to a new report from the National Housing Finance and Investment Corporation and the Commonwealth Bank.

Analysis of first-home buyer data from the scheme has found borrowers using the HGS are taking out smaller loans relative to income compared with the broader first-home buyer market.

The average borrower using the scheme also has seen their equity grow by $82,000 since 2020, in line with long-run averages despite property prices falling for much of last year.

Home prices have increased through the first seven months of the year despite interest rates rising a dozen times since May 2022.

NHFIC head of research Hugh Hartigan said first-home buyers were still purchasing despite the challenging conditions.

“Despite the challenging interest rate environment and dwelling price falls last year, it is encouraging that the (average) equity position of Home Guarantee Scheme participants appears to be holding up,” he said.

The average deposit under the scheme has increased marginally from $35,200 to $36,400 since 2020. However, it is considerably lower than the broader first-home buyer market, where average deposits rose by almost 50 per cent from $108,400 to $159,000.

While the average loan amount under HGS has increased 4.7 per cent since 2020, a loan for the broader first-home buyer market has increased by 13.4 per cent. Mr Hartigan said buyers outside of the scheme might have other ways of supplementing their savings.