Home Guarantee Scheme price caps lift to support first-home buyers

Price caps in several major cities to increase $100,000

Home Guarantee Scheme price caps lift to support first-home buyers

House price caps are set to be lifted in a bid to support more first-home buyers into homes.

Ahead of the May 21 federal election, Prime Minister Scott Morrison announced on Sunday night price caps for homes eligible under its Home Guarantee Scheme would increase, helping more home buyers get onto the property ladder.

Price caps for Sydney and regional NSW will increase from $800,000 to $900,000 and for Melbourne and regional Victoria, from $700,000 to $800,000.

The price cap rises, to come into effect on 1 July 2022, are off the back of the recently boosted Home Guarantee Scheme, in which the Federal Government said in March it would double the number of places offered under the scheme to 50,000 per year.

Read more: Lenders back Budget housing affordability measures

Under the scheme, first-home buyers with as little as 5% deposit can get onto the property ladder, the government guaranteeing the remaining 15%, removing the mortgage insurance requirement.  By reducing the savings required for a house deposit, recognised as a barrier to home ownership, the scheme would help more Australians get into their first home sooner.

We’re building a stronger future for Australians by making home ownership easier by making more properties eligible for the Scheme and expanding it to 50,000 places each year,” Morrison said.

“People are cutting years off the time they’d need to save a deposit for a home because of this program. Now even more Australians can get into a home sooner.”

He said saving to buy a house had always been hard work, which due to price increases, had become harder.

“That’s why these higher price caps will help more people realise their dreams and lock in a stronger future for themselves,” Morrison said.

Assistant Treasurer and Minister for Housing Michael Sukkar said the adjusted price caps would help guarantee more Australians could achieve their home ownership dream. Saving a deposit was one of the hardest part of getting into home ownership.

Adjusting the price caps for the Home Guarantee Scheme gives Australians more options when buying a home.

“Because 41% of scheme-backed loans are ahead of their pay back schedule, we are confident these adjusted price caps strike the right balance,” Sukkar said.

“60,000 Australians have already been supported into home ownership under the Home Guarantee Scheme, with the Morrison Government’s housing policies helping more than 300,000 Australians with the purchase of a home. With our support, first homebuyers reached their highest levels in 12 years.”

The capital city price cap applies to regional centres with a population above 250,000. A lower price cap applies to the rest of each state.

Based on median house values to March 31, CoreLogic data showed 39.9% of suburbs nationally had a value up to the new threshold.  This was up from 24.1% of suburbs under current policy levels.

For units, 81.2% of suburbs nationally were eligible for the home guarantee scheme under new thresholds, up from 65.4%.

For houses in greater Sydney, CoreLogic data showed the percentage of suburbs up to the current threshold was 6.3%, increasing to 16.2% under the new guidelines. For units, the percentage of suburbs up to the current threshold rose from 46.6% to 59%.

For houses in greater Melbourne, it showed the percentage of suburbs up to the current threshold was 10.6%, increasing to 22.9% under the new guidelines.  For units, the percentage of suburbs up to the current threshold rose from 57.8% to 79.1%.

A CoreLogic spokesperson said raising the price thresholds was a positive outcome for housing demand, as it meant first-home buyers and single parents would have a broader range of properties to choose from.

“Lifting the thresholds is a positive outcome for housing demand. It means first home buyers and single parents will have a broader range of properties to choose from when making their purchase decision and is likely to increase the popularity of the Home Guarantee Scheme,” the CoreLogic spokesperson said.

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The higher thresholds would help to boost housing demand across the lower priced detached housing markets, as interest rates rise.  For the unit sector, the increased thresholds were likely to have a broader appeal, with 81.2% of suburbs nationally meeting the price caps, based on the current median unit value.

In suburbs where a larger a larger portion of homes met the price caps of the policy, stronger demand from first-home buyers and single parent families could help to keep a floor under house prices.

“Adjusting the thresholds higher is a logical move, considering every region across the country has recorded a rise in home values over the past year, however with some cities experiencing softer conditions, if not outright declines, some of the threshold increases may be out of alignment with the change in housing values over the financial year.

“For example, the threshold across the ACT has increased by $250,000 while housing values are up approximately $165,450 over the year to March 2022.  Similarly, in Perth, the threshold has increased by $100,000 while housing values are only $35,510 higher over the past year.  Other cities have seen housing values rise substantially more over the past twelve months than what that threshold has been lifted.  Brisbane housing values are up approximately $169,720 and Sydney values are roughly $168,300 higher over the year,” the CoreLogic spokesperson said.

Price caps by region with approximate change in property value: March 2021 to March 2022.

  • NSW
    Capital city and regional centres: $900,000 (up from $800,000). Increase $100,000 (approximate property value increase $168,298). Rest of NSW: $750,000 (up from $600,000). 

  • Victoria
    Capital city and regional centres: $800,000 (up from $700,000).  Increase $100,000 (approximate property value increase $72, 112). Rest of Victoria: $650,000 (up from $500,000)

  • Queensland
    Capital city and regional centres: $700,000 (up from $600,000).  Increase $100,000 (approximate property value increase $169, 719).  Rest of Qld: $550,000 (up from $450,000)

  • WA
    Capital city and regional centres: $600,000 (up from $500,000).  Increase $100,000 (approximate property value increase $35,508).  Rest of WA: $450,000 (from $400,000).

  • SA
    Capital city and regional centres: $600,000 (up from $500,000). Increase $100,000 (approximate property value increase $125,337).  Rest of SA: $450,000 (from $350,000).

  • Tasmania
    Capital city and regional centres: $600,000 (up from $500,000).  Increase $100,000 (approximate property value increase $133,316).  Rest of Tas: $450,000 (up from $400,000)

  • ACT
    Capital city and regional centres: $750,000 (up from $500,000). Increase $250,000 (approximate property value increase $165,447)

  • NT
    Capital city and regional centre: $600,000 (up from $500,000)

The thresholds for Newcastle and Lake Macquarie, Illawarra (Woollongong); Geelong; Gold Coast and Sunshine Coast use the capital city thresholds.  

The 50,000 annual places available under the Home Guarantee Scheme include 5000 guarantees for single-parent families, who can apply with a deposit of just 2%.  There’s also 10,000 guarantees each year for buyers, including non-first home buyers and permanent residents, to buy or build a new home in regional areas.

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