Homebuyers from across Melbourne and Victoria have flocked to a low-deposit homebuying scheme, but it’s prompted warnings from experts. Picture: Tony Gough.
Victorian homebuyers are the nation’s most likely to gamble a bigger mortgage on cutting their timeline to break into the housing market.
New figures from Housing Australia show a nation-leading 89,400 Victorians have signed up to use the federal government’s 5 per cent deposit Home Guarantee schemes since they were implemented in 2020.
But with the housing market on the cusp of a downturn, interest rates expected to rise as soon as Tuesday, and the government scheme having driven up prices for more affordable homes — industry experts are warning the house doesn’t always win when betting on property profits.
RELATED: Melb set for grim $1m house price crash milestone
Rise of first-home buyers aged 40+ sparks Victorian mortgage fears
Melbourne’s iconic Skipping Girl for sale
The stats show the state’s typical first-home buyer is a couple aged over 30, earning $157,000 a year and buying a home worth $681,000.
And the odds are they are buying in affordable postcodes like 3029, Hoppers Crossing and Tarneit, 3064, Craigieburn and Roxburgh Park, 3978, Clyde, and 3977, Cranbourne.
There have also been 1100 Victorian single parents who have used the Family Home Guarantee, which can connect them with a home for a deposit as low as 2 per cent.
But only 8900 of the states 89,400 total scheme users have built new residences with the home loan deposit program’s assistance since 2020 — with most instead piling into more affordable existing housing markets.
The scheme was given a major boost last October when the Albanese government removed income caps and raised purchase price thresholds to $650,000 in regional Victoria and $950,000 for regional areas.
Since October last year Broadmeadows’ median house price has risen $35,000. Now 3 Seymour St, Broadmeadows, is for sale from $630,000-$660,000.
Realestate.com.au economist Anne Flaherty says the scheme has driven up prices.
Since then Melbourne’s most affordable suburbs to purchase a house have had major increases, according to PropTrack data.
Melton’s $500,000 median price gained $45,000, Broadmeadows surged from $610,000 to $645,000, Wyndham Vale’s typical house has risen $16,000 and in Werribee home buyers have had to find an extra $40,000 to meet the new $660,000 standard.
PropTrack senior economist Anne Flaherty said while it was positive so many Australians were being helped into homeownership, the scheme wasn’t a good long-term solution.
“A scheme like this doesn’t do anything to increase housing supply,” Ms Flaherty said.
“It’s demand-side policy that pushes up prices, and we have seen that.”
The economist said it was critical the government find ways to support new housing construction, rather than just push demand.
While acknowledging Victoria’s relatively high supply of affordable homes had given first-home buyers in the state an edge, she noted much of that supply was likely coming from investors selling up — with latest figures showing the state still has more of them offloading homes than buying in.
3 Riversdale Drive, Werribee, is for sale at $800,000-$880,000 — below the cap for the 5 per cent deposit program, but the suburb’s median house price has surged $40,000 in six months.
Cohen Handler buyer’s agent Zac Jacobs said while the scheme was great to help get people into the market, it did mean a bigger mortgage and that buyers would pay more interest on their home.
“Buyers get into the market earlier so they don’t wait two years to save up 20 per cent, but they do have to pay off a bigger loan,” Mr Jacobs said.
He added a warning that rushing into a purchase for a cheaper home earlier might seem advisable, but if the property was cheap for a reason — it could cost the buyer longer term.
Mr Jacobs advised those using the scheme to look for character homes such as Art Deco apartments in inner suburbs if possible, as these would provide better capital growth prospects.
“The other advice I give to first-home buyers is by all means, buy the property you want to live in for now, but don’t try and upgrade and sell it in three years time,” he said.
The buyer’s agent said those using the scheme should be looking for homes that would suit them for 15 years before making a move, ideally paying them off in that time and then keeping them as an investment.
5 The Strand, Melton, could be yours for $669,000-$729,000 — but the suburb’s typical house price has soared $45,000 in the past six months.
The Albanese government expanded the scheme to remove income caps and allow more expensive purchases in October last year. Picture: NewsWire / Nikki Short.
“If you are going to sell in five years, that’s not OK — over the longer term you have more chance of the home growing in value,” he said.
Mortgage Choice broker Christopher Ladley said while almost every first-home buyer he worked with now used the scheme, a lot of them still weren’t aware of it until they spoke with a broker.
“We are regularly talking to people who assume they can’t do it (buy a home), and often we are pointing out to them that they can do it and in some cases it’s bringing them forward a few years,” Mr Ladley said.
The broker added that they were writing unprecedented numbers of home loans using the scheme since October last year.
From single-parent loans to helping first-home buyers, he said he’d connected a significant number of buyers with the Home Guarantee scheme over the past few years.
He added that while getting a loan for a single parent was often “harder” he said it was a “good story that makes you feel good when you do get it over the line”.
An $840,000-$850,000 asking price for 676 Armstrong Rd, Wyndham Vale, still falls within the parameters of the 5 per cent deposit home guarantee scheme.
Mr Ladley is also encountering a growing number of homebuyers relocating from interstate as they can’t afford to buy in their former home city — which he said could help explain Victoria’s higher uptake of the scheme than other regions.
Mr Ladley said the stats largely stacked up with what he was seeing from buyers using the scheme, however most couples were spending more than $680,000.
“A lot are spending $800,000 or $900,000, which the guarantee is allowing them to do and previously they couldn’t get a deposit for,” he said.
Sign up to the Herald Sun Weekly Real Estate Update. Click here to get the latest Victorian property market news delivered direct to your inbox.
MORE: Huge changes to Vic retirement start today
English (US) · 