First-Home Buyer Scheme Sees Significant Uptake After Reforms

The number of first-home buyers utilizing a 5 percent deposit scheme in Australia has increased significantly since the federal government implemented changes four months ago.

Government data indicates that 22,921 guarantees were issued in the four months following the scheme's overhaul on October 1. This represents a 75 percent increase compared to the previous four-month period (June-September), which saw 13,105 guarantees.

Scheme Overhaul Drives Uptake

The increase follows the removal of caps on property prices, scheme places, and income limits. Previously, the scheme, known as the First Homebuyer Guarantee, was restricted to singles earning under $125,000 annually and couples with a combined income below $200,000.

The primary benefit of the scheme allows buyers to purchase a home with a smaller deposit while avoiding lenders mortgage insurance (LMI), as the government guarantees 15 percent of the loan.

"Incentives play a role in the housing market, leading to increased uptake when grants or discounts are introduced." — Diana Mousina, AMP Deputy Chief Economist

Who is Benefiting?

Data indicates that almost two-thirds of the guarantees issued in the past four months supported the purchase of houses. Additionally, under-30s constituted two-fifths of beneficiaries, and over 10,700 (nearly 30 percent) were in regional areas. The scheme has seen a smaller uptake among single parents, while 18 percent of those supported were key workers.

AMP deputy chief economist Diana Mousina expressed concern that the scheme might be primarily benefiting individuals who can still access familial financial support to acquire larger properties, rather than those most in need.

Economic Impact and Concerns

Government modeling in October suggested the changes would raise property values by only 0.5 percent over six years. However, the Insurance Council of Australia projected a potential 10 percent increase in values within the first year.

Mousina also commented that while the expanded scheme could stimulate house prices, its full impact would take time. She identified supply issues as the primary driver of housing unaffordability, stating that demand-side policies like this scheme could increase prices long-term without a corresponding increase in supply. Property prices in Brisbane, for example, increased by 5.1 percent in the last quarter.