HOME > BLOG > Buying and Selling > Will the new first home buyers scheme affect you?

We fire four quick questions at CoreLogic’s head of research Asia Pacific, Tim Lawless

By: Charlotte Hartley-Wilson, Dec 2019

In an attempt to boost the number of first home buyers, January 2020 will see the Federal Government allow first homeowners to purchase a property with a deposit of just five per cent and avoid paying Lender’s Mortgage Insurance on their loan, with the Government effectively acting as guarantor.

Although the finer points of the First Home Loan Deposit Scheme (FHLDS) have not been announced, realtors, lenders, investors and homeowners have all voiced concerns regarding the scheme’s potential to disrupt the market.

At the centre of the discussion is the concern that an increase in the number of first home buyers as a result of the scheme will inflate property prices. Some are also worried that property sales could fall through if first home buyers purchase a property but do not secure a place in the scheme.

CoreLogic is the largest provider of property information, analytics and property-related risk management services in Australia and New Zealand.

Q&A with Tim Lawless of CoreLogic

  • State Custodians caught up with Tim Lawless, CoreLogic’s head of research Asia Pacific to discuss how the FHLDS will affect the market and the hidden opportunities for homeowners and investors in 2020.

  • Will the First Home Loan Deposit Scheme increase the volume of first home buyers?

    • Considering it is limited to 10,000 participants, which equates to less than 10 per cent of first home buyer demand, based on the past 12 months of first home buyer mortgage commitments, the increased demand isn’t likely to have a significant impact on overall market activity or place excessive upwards pressure on prices.

  • Will January see higher auction attendance rates and/or faster sales as a result of the scheme?

    • January is typically a seasonally quiet month for auction activity, and we aren't expecting the auction markets to be impacted by the scheme. Areas popular with first home buyers may see heightened competition amongst first home buyers; if that is the case, we could see further upwards pressure on housing prices in these regions.

  • Who will the market be best suited to in 2020? First Home Buyers, Next Home Buyers, Investors or Sellers?

    • If the current rate of house price growth continues across Sydney and Melbourne, we could see housing prices reach a new record high through the first half of the year in these markets.

      Housing affordability is likely to remain a challenge in these cities and prevent some first home buyers from participating in the market. Investors are well placed to take advantage of the lowest interest rates since the 1950's together with rental yields that are often higher than the cost of debt.

      Sellers are also in a good position, with advertised stock levels generally low and buyer demand rising, homes are taking a shorter amount of time to sell and vendors are discounting their prices less.

  • What are the hidden opportunities for investors in 2020?

    • Investor activity and new dwelling supply is winding down, so there is a strong likelihood that rental markets could tighten as housing affordability constraints become more pronounced.

As Tim notes, overall it seems that the scheme is unlikely to disrupt the property market. So, what should you look out for?

Ultimately, while housing prices are likely to rise, growth in household incomes is expected to remain weak, renewing housing affordability pressure in markets where home values are rising faster than incomes.

Looking forward, this is good news for next home buyers and investors as it’s possible that first home buyers will reduce as a proportion of overall market activity, and that there won’t be a substantial boost to housing demand as a result of the first home buyers’ scheme.

The opinions expressed in this article are the opinions of the author(s) and not necessarily those of State Custodians. The above is general commentary only and is not advice tailored to any individual’s financial situation. We recommend seeking advice from a finance professional before implementing changes relating to your finances.

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