Homes in most major cities are too expensive to qualify for the plan
A new program by the federal government will allow single parents to buy a home with a deposit of as little as 2% without lender’s mortgage insurance. The problem is that single parents in most major cities won’t be able to afford a home under the scheme, experts say.
Rising property values and caps set below most median house and unit prices mean that most single-income parents won’t be able to access the Single Parent Family Home Guarantee (SPFHG) program, according to a report by news.com.au.
Mortgage experts have said the scheme is unrealistic, while the federal opposition says it will only help a small percentage of single-parent families.
The median house price in every major capital city is more than $100,000 higher than the price cap under the program, while buyers in Sydney and Hobart wouldn’t even qualify for a unit at median value, according to data from CoreLogic.
In Sydney, the cap for the program is $700,000 for existing dwellings, according to news.com.au. However, in April median prices in the greater metro area were $1.47 million for houses and $771,859 for units.
“The scheme has good intentions; however, it does little to address the overarching issue of housing affordability in property hot spots around the country,” Sally Tindall, research director for RateCity, told news.com.au. “Helping single parents get greater security around where they live is important, but the property price caps attached to this scheme aren’t realistic for many single parents who need extra space for their children.”
The anticipated continuing rise in property prices by the end of the year will also mean that the median unit value in Melbourne, Canberra and Perth will exceed the scheme’s price cap.
Read more: 2% deposit? That’ll do, says government
Labor’s spokesperson for women, Tanya Plibersek, said the scheme was “no help at all.”
“There are a million single-parent families in Australia. This will only help 2,500 a year for four years,” Plibersek said. “This policy is tiny. It’ll cost the budget just $300,000 – it’s too small and offers basically no help at all. Scott Morrison’s the classic ad guy – great at generating a headline, then he’s all like, ‘T&Cs may apply.’”
Then there’s the fact that the program does nothing to address affordability in a booming market. According to RateCity, a 2% deposit on a $700,000 mortgage with a variable rate of 3.3% would result in a monthly repayment of $2,941. That equates to roughly half the monthly salary of the average female private-sector worker just to service the loan, according to news.com.au. Anticipated rate hikes in the next three years mean the amount of debt outstanding could also increase.
Tindall said that a single mother on the average female wage would likely experience severe mortgage stress just from buying a median-priced apartment in most cities.
“Buying a property with a wafer-thin deposit can be risky, especially in the face of rising interest rates,” she told news.com.au. “The bigger the loan people have, the more they are going to be impacted by rising interest rates down the track.