Victorian regional towns where first home buyers can purchase for less than $650,000

First home buyers in regional areas will get more government help to buy from today, although many are spooked by sky-high property prices and rising interest rates.

Buyers could consider a modest family home in regions such as Geelong, pockets of Bendigo or Ballarat, Warrnambool, Portland, parts of the Alpine shire, Gippsland, Wangaratta and more.

Myrtleford offers options for first home buyers. Credit: iStock

Someone who has lived in a regional area for the past 12 months can purchase a home with a low 5 per cent deposit and avoid lenders mortgage insurance, through the federal government’s Regional First Home Buyer Guarantee scheme that starts on Saturday.

There are 10,000 places available and the program is capped at properties up to $800,000 in Geelong, and up to $650,000 elsewhere in regional Victoria. This is in addition to existing programs for first home buyers and single parents that offer 40,000 places a year.

For that budget, buyers could consider a typical house in Geelong suburbs such as Hamlyn Heights, Mount Duneed, Belmont or Curlewis, which all have a median value of between $782,000 and $796,000, on CoreLogic data.

Further afield, options include Myrtleford ($648,000), Gippsland towns such as Leongatha ($582,000) or Bairnsdale ($459,000), or in western Victoria Warrnambool ($620,000) or Portland ($423,000).

Suburban Bendigo neighbourhoods come under the cap, such as Ascot ($645,000) or Spring Gully ($640,000), or in Ballarat, the more central Soldiers Hill ($631,000).

CoreLogic’s head of residential research for Australia, Eliza Owen, said regional dwelling values had risen faster than in the city since the pandemic hit.

“Over the past couple of years we’ve seen a really strong uplift in regional Australian home values which has probably created a lot of shock for those trying to get into the market,” she said.

She said the new scheme was practical, especially for renters facing an 18 per cent rise in regional Victorian rents since March 2020 who could buy instead, but it did not address some underlying affordability issues.

“It also highlights the need for policies that help low-income renters. Part of a blind spot of this policy is it assumes everyone’s going to buy and that’s just not the case,” she said.

The crisis facing low-income renters was laid bare in a Productivity Commission report this week that said about two-thirds of low-income households are in rent stress.

Economists have previously raised concerns about first home buyer support pushing up prices for entry-level properties. But Owen said this program would likely have limited effect on prices because first home buyers have been dropping out of the market as interest rates rise, while prices are falling and there is no deadline as there was with the HomeBuilder grant.

Professor Hal Pawson, associate director at the City Futures Research Centre at UNSW, said a rush of buyers was unlikely.

This home in Spring Gully in Bendigo sold for $510,000.Credit: Barry Plant Bendigo

Pawson’s recent research found first home buyer assistance schemes primarily brought forward purchases that would have occurred anyway, adding to demand and prices.

The impact of additional guarantees would likely be muted in the current market, he said, amid rising interest rates.

“It will have a small price impact. I think the dynamic of price declines is now so strong, that these [guarantees] will not turn the tide, but they will have a small effect in moderating the direction,” he said.

McGrath Geelong principal David Cortous said there are still a few first home buyers in his market, but given all the reports of interest rate rises “they are probably a little bit spooked”.

This home in Geelong’s Hamlyn Heights sold for $750,000.Credit: Gartland

He felt there was more activity among entry-level buyers in the regional centre compared to parts of Melbourne.

“It’s a more affordable market and that’s why we haven’t seen our market pull back as much as the capital city markets have,” he said.

On a budget of $800,000, a buyer could expect a three to four-bedroom house, he said.

In the state’s north-east, Myrtleford Real Estate and Livestock director and sales manager Greg Doodewaard said the entry-level market had been busy until the first interest rise about six months ago.

“There is no urgency. [They think] ‘If we miss out, we miss out. We will wait for the next one,’” he said. “Before, everyone wanted to buy now.”

Lacklustre wages growth also made it harder for first time buyers, he said, a concern for the local town.

For $650,000, a buyer could find a nice house with three bedrooms and two bathrooms, he said. Entry-level houses trade for $550,000 to $600,000.