Buyers see positive returns despite a weaker market, report says
First-home buyers utilising the federal government's low-deposit scheme are borrowing less and experiencing positive returns, even in a weaker housing market, according to a new study by the National Housing Finance and Investment Corporation and the Commonwealth Bank.
The Home Guarantee Scheme (HGS), which enables buyers to enter the market with a deposit as low as 5%, has proven to be a pathway towards steady equity growth for its participants, according to a report by The Australian. The analysis of first-home buyer data from the scheme reveals that borrowers utilising the HGS are taking out smaller loans relative to their income compared to the broader first-home buyer market.
The average borrower within the scheme has witnessed their equity increase by $82,000 since 2020, aligning with long-run averages, despite property prices experiencing a decline for a significant portion of last year, The Australian reported.
Surprisingly, home prices have continued to rise throughout the first seven months of this year, despite a dozen interest rate hikes since May 2022.
Hugh Hartigan, head of research at NHFIC, told The Australian that first-home buyers were showing resilience in the face of challenging conditions.
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“Despite the challenging interest rate environment and dwelling price falls last year, it is encouraging that the [average] equity position of Home Guarantee Scheme participants appears to be holding up,” he said.
While the average deposit under the scheme has seen a marginal increase from $35,200 to $36,400 since 2020, it remains significantly lower than the broader first-home buyer market, where average deposits rose by nearly 50%, from $108,400 to $159,000, The Australian reported. Additionally, while the average loan amount under the HGS has risen by 4.7% since 2020, loans within the broader first-home buyer market have increased by 13.4%.
Hartigan told The Australian that buyers outside of the scheme may have alternative means of supplementing their savings.
In June, the government reported that 100,000 Australians had taken advantage of the scheme to purchase a home. The government also recently announced an expansion of eligibility criteria for the scheme.
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