Deposit help flagged for first-home buyers

The federal government is considering expanding its popular low deposit scheme for first home buyers struggling to save enough to take out a mortgage in the soaring property market.

First-home buyers Zoie and Tim Barclay bought a unit in Hamilton, Brisbane, after being unable to afford a house. Picture: Lyndon Mechielsen

The federal government is considering expanding its popular low-deposit scheme for first-home buyers who are struggling to save enough to take out a mortgage in the booming property market.

Federal Housing Minister Michael Sukkar has conceded some aspiring entrants into the property market are in danger of being priced out of the market, with soaring house and unit values requiring ever increasing minimum deposits and bank mortgages.

In an interview with The Australian, Mr Sukkar said a reassessment of existing support to make the market more accessible was on the agenda ahead of next year’s pre-election federal budget.

“If the problem is still the deposit hurdle, then we’re very focused on helping first-time buyers get over that hurdle, and that will inform our thinking into anything further we do,” Mr Sukkar said.

Prior to the pandemic in January 2020, the federal government launched the First Home Loan Deposit Scheme, which allowed 10,000 first-home buyers to purchase a “modest” home with only a 5 per cent deposit in savings. While price and income limits were placed on the scheme, it proved successful, with strong demand across several intakes and became the basis for two further stimulatory measures focused on new home building and single parents.

However, the number of market entrants has dropped by almost a third since the start of the pandemic housing market boom in October last year, which caused prices to climb by more than 22 per cent since.

A report on housing affordability released last month by CoreLogic and ANZ found it now takes the average household 10.8 years to save a 20 per cent deposit for a median house in Australia, a new record. The assumption – based on a savings rate of 15 per cent of total income – shows saving for a unit is marginally quicker at nine years.

CoreLogic’s head of residential research Eliza Owen said the deposit was the largest hurdle for first-time buyers, with the cost of recurring mortgage repayments remaining relatively steady over the past decade. “If we look at the typical house value across the capital cities at the moment, the 20 per cent deposit for a median house (is) sitting at $175,000 – up from $141,000 in the past year,” Ms Owen said. “The rapid nature of the current upswing demonstrates how much more difficult it has ­become (to save the deposit).”

The MP in charge of the federal government’s affordability inquiry, Jason Falinski, said both state and federal governments should consider ways to assist hopeful homeowners. Some of the ideas floated included allowing first-home buyers to either draw from their superannuation for a deposit or use that money as a security against a home loan, similar to a guarantor. Alternatives could also include direct grants or tax concessions.

Tim and Zoie Barclay, aged 30 and 32, purchased their first home in September, an apartment in the inner-Brisbane suburb of Hamilton, after saving for 3½ years. With no children, the couple meticulously tracked their bills and spending in an excel spreadsheet and managed to save 35 to 40 per cent of their combined income each month, equating to an 8 per cent deposit.

They did not use any federal or state government assistance, but supported additional measures for others coming through.

“Initially, we were chasing the dream of being able to have our own backyard and a bit of land,” Ms Barclay said. “As the pandemic kind of went on, we noticed the houses in the price brackets that we had been able to save up to had come out of our reach.”

Rates of home ownership have been steadily falling over the past two decades, according to the Australian Bureau of Statistics. Seven in 10 Australians owned their home in 1997-98, falling to 66.2 per cent in the year to June 2018.