Price caps for first-home buyer schemes lifted as property prices surge

Higher price limits for first-home buyers using the federal government’s deposit scheme will ensure more people can access the program as property prices surge, experts say.

The property price caps under the First Home Loan Deposit Scheme will rise by $100,000 or more across the capital cities and by at least that amount in most regional areas.

The changes will make a big difference to the coverage of the scheme, realestate.com.au economist Paul Ryan said.

“Given the strong housing price growth we have seen over the past six months, the higher caps will ensure the scheme is still applicable for many homebuyers,” Mr Ryan said.

Houses

The property price caps under the First Home Loan Deposit Scheme have been lifted. Picture: Getty

The higher price caps apply from 1 July for the main FHLDS, which helps low and middle income earners buy their first home with a deposit as low as 5% without needing to pay for lenders mortgage insurance, and the new Family Home Guarantee, which will help 10,000 single parents over four years buy a home with a deposit as low as 2%.

The government said the new price caps will ensure people can continue to purchase a home as well as accommodate larger families under the Family Home Guarantee, which will start once the legislative changes have passed parliament.

Assistant Treasurer and Housing Minister Michael Sukkar said the increase in the price caps was sensible given the FHLDS started 18 months ago.

“It’s a reflection that those caps need to increase to accommodate first-home buyers, particularly, purchasing a modest first home or in the case of single parents purchasing a family home,” Mr Sukkar said on Saturday.

“We believe that the Family Home Guarantee is going to be very enthusiastically taken up as well and the announcement of these increased house price caps will put these programs in reach of so many more Australians.”

Croydon Melbourne

The higher property price caps are expected to make the deposit scheme more accessible to more people. Picture: realestate.com.au/buy

Master Builders Australia CEO Denita Wawn said the schemes were helping people bridge the deposit gap, which she described as the greatest barrier to people owning their first home.

“Lifting the price caps for these schemes will make them more accessible to more people and that’s a very good outcome,” Ms Wawn said.

Kristin Brookfield, the Housing Industry Association’s chief executive for industry policy, said adjusting the price caps made good sense.

“Increasing the price caps for this next tranche is an important recognition that house prices have been changing due to the impacts of the pandemic,” Ms Brookfield said.

Another 10,000 FHLDS places will be available in the 2021/22 financial year, plus an additional 10,000 places for first-home buyers building a new home or purchasing a newly-built home. The already-higher property price caps under the extended New Home Guarantee program are unchanged.

Mr Ryan said the price cap increases and an extension of time for building to commence under the New Home Guarantee were good policy changes to keep the scheme relevant to current market conditions, but backed industry calls to remove the annual caps on the number of scheme places.

“I don’t think caps are a good way of limiting the scheme – it becomes a lottery who gets the benefit and who doesn’t,” Mr Ryan said.

“The government should open up access to the scheme, which clearly has been successful in opening up housing accessibility for first-home buyers.”

Mr Sukkar said 30,000 first-home buyers have benefited from the FHLDS since it began in January 2020.

Price caps for cities and regions increase

The FHLDS property price caps have been lifted across Australia, with the exception of the ACT where the limit remains at $500,000.

The price caps have been lifted by $100,000 in Sydney, Melbourne, Perth, Adelaide and Hobart, while the cap for Brisbane and all of the Northern Territory will rise by $125,000.

“It will make a big difference to the coverage of the scheme,” Mr Ryan said.

“For example, the new thresholds in Sydney and Melbourne cover 43% and 55% of sales over the past year, respectively, up from 31% and 41%,” he said. The calculations are based on valuers-general sales data and realestate.com.au data on agent-advised sales for houses and units over the 12 months to May 2021.

Ryde Sydney

First-home buyers using the deposit scheme can now buy homes up to $800,000 in Sydney. Picture: realestate.com.au/buy

The price caps rise to $800,000 in Sydney and $700,000 in Melbourne, where the latest realestate.com.au data showed median sale prices for houses at $1.1 million and $800,000 respectively.

“Other cities will also see increases in coverage,” Mr Ryan added.

Mr Ryan calculated the new thresholds cover 62% of house and unit sales in Brisbane (up from 45%), 55% in Adelaide (from 38%), 59% in Perth (from 41%) and 51% in Hobart (up from 33%).

The new price caps for the FHLDS and Family Home Guarantee are:

  • Sydney and the NSW regional centres of Newcastle and Lake Macquarie, and Illawarra – $800,000 (up from $700,000)
  • Rest of NSW – $600,000 (up from $450,000)
  • Melbourne and Geelong – $700,000 (up from $600,000)
  • Rest of Victoria – $500,000 (up from $375,000)
  • Brisbane, the Gold Coast and the Sunshine Coast – $600,000 (up from $475,000)
  • Rest of Queensland – $450,000 (up from $400,000)
  • Perth – $500,000 (up from $400,000)
  • Rest of Western Australia – $400,000 (up from $300,000)
  • Adelaide – $500,000 (up from $400,000)
  • Rest of South Australia – $350,000 (up from $250,000)
  • Hobart – $500,000 (up from $400,000)
  • Rest of Tasmania – $400,000 (up from $300,000)
  • ACT – $500,000 (unchanged)
  • Northern Territory – $500,000 (up from $375,000)
  • Jervis Bay Territory and Norfolk Island – $550,000 (up from $450,000)
  • Christmas Island and Cocos (Keeling) Islands – $400,000 (up from $300,000)

Housing prices have been surging, with Australian Bureau of Statistics data showing residential property prices rose 5.4% in the March quarter – the strongest quarterly growth since late 2009 – and by 7.5% over the year.

The combined value of Australian homes also surpassed the $8 trillion mark for the first time, with the mean price of residential dwellings rising by $39,100 to $779,000 in the March quarter.

The FHLDS price caps for regional areas also increase from 1 July, with the biggest rises of $150,000 (to $600,000) in NSW and $125,000 (to $500,000) in Victoria.

“The larger increases in thresholds in regional areas reflects that price growth there has outperformed over the past year,” Mr Ryan said.

“So the thresholds have been updated to maintain the relevance of the program in these areas.”





First-home buyers get more time to start building

While the New Home Guarantee price caps remain the same, buyers accessing the next 10,000 places will now have 12 months to start building.

“Due to the enormous success of HomeBuilder and the New Home Guarantee, it has become more difficult to get builds started,” Mr Ryan said.

“So extending this timeline to start builds will reduce the uncertainty and potential for first-home buyers to miss out on the scheme, or have to pay more to start builds on-time.”

Ms Brookfield said extending the build time to 12 months instead of six months was critical.

“The success of HomeBuilder has placed pressure in the supply chain for builders, contractors and suppliers, making it important to provide time for new home projects under this program to start work.”

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