Over the three months to November 30, Sydney dwelling prices lifted by 6.2 per cent and by 6.4 per cent in Melbourne, CoreLogic figures show. Dwelling values in Sydney rocketed 2.71 per cent and across Melbourne by 2.25 per cent in November alone.
For many first-time buyers, even when prices were falling, a significant obstacle was coming up with a sizeable deposit. And buyers with less than a 20 per cent deposit of the purchase price are usually required by lenders to have mortgage insurance.
Though paid for by borrowers, the insurance covers lenders for any shortfall that may occur through the sale of a re-possessed house.
The one-off premium can to run to several thousands of dollars – even on modestly priced properties – although it is usually added to the home loan at the time of purchase.
The Morrison government’s First Home loan Deposit Scheme will start on January 1.
The scheme guarantees mortgages for up to 10,000 first-home buyers each year who have saved deposits as low a 5 per cent, helping them buy sooner and avoid having to pay mortgage insurance.
The government’s scheme limits the purchase price of Sydney properties to $700,000, which to be honest, is a joke
Graham Cooke, insights manager at comparison site Finder, said that aside from the small number of borrowers who may be able to get help in buying their first home, the property value caps for the scheme are also “problematic”, especially in Sydney.
“The government’s scheme limits the purchase price of Sydney properties to $700,000, which to be honest, is a joke,” he said. That is also the cap for regional centres in NSW, defined as cities with populations of more than 250,000. The cap for the rest of NSW is $450,000.
“Not many properties [in Sydney] will qualify for this scheme – some apartment buyers may qualify, but not many houses are available for below that price,” Mr Cooke said.
The cap for houses is $600,000 for Melbourne and regional Victorian centres and $375,000 for the rest of Victoria.
Successful applicants must have taxable incomes of $125,000 or less a year for singles and $200,000 or less for couples.
The scheme is administered through the National Housing Finance and Investment Corp. in partnership with major lenders. Last week, the scheme signed its first lender, NAB.
The government has said the scheme is designed to help first-home buyers purchase a modest home and is just one way it supports them.
In 2017, the Morrison government introduced the First Home Super Saver Scheme, which helps first-home buyers save a deposit inside their superannuation fund by making voluntary contributions.
The government will be monitoring the new scheme, including how the supply for loans is meeting demand, and it can be modified, if required.
Robert Mellor, executive chairman of economic and property forecaster BIS Oxford Economics, said first timers can take some heart that prices of cheaper dwellings, particularly apartments, are not rising as quickly as the middle and upper ends of the market.