Cotality finds fast-tracking of Home Guarantee Scheme will improve number of affordable homes

ABC NEWS (Australia)

New property data by Cotality has found the fast-tracking of the federal government's Home Guarantee Scheme will almost double the number of properties first home-buyers should be able to afford. As of October the 1st, the scheme will mean buyers only need a 5 percent deposit. Head of Research at Cotality Eliza Owen says as more properties become eligible, there will be more competition in the market.

Transcript

00:00We found that looking at markets where the median value is up to the new thresholds of

00:07the scheme, it's a real expansion of house and unit markets that become available. So

00:13at the moment, there's probably about a third of house and unit markets across Australia

00:17that go up to the current thresholds. Once that's expanded, it goes up to about 63%.

00:23That includes 52% of house markets and almost 94% of unit markets. So no doubt this scheme,

00:32which would already boost demand given its expansion with the lifting of income caps,

00:38will now also see demand spread further given the extra coverage of the scheme with those

00:44limited price caps. And we should just recap at this point,

00:48what the scheme is and what exactly changes on October 1st?

00:52Absolutely. So at the moment, a eligible first home buyer could go in with a participating lender

00:58to get a home loan with as little as a 5% deposit. And the idea is that the government guarantees up

01:05to 15% of the loan. And that means that that borrower wouldn't have to pay lenders mortgage

01:11insurance, which is a cost that can be tens of thousands of dollars for going in under a 20%

01:17deposit. So initially, this was sort of limited places had grown a little bit. It's currently at

01:23about 35,000 places a year. But from October 1, what they're doing is removing income caps. So any

01:30eligible first home buyer on any income level can now access the scheme. They're lifting the lid on

01:36places. So it's not limited to 35,000 a year. And they've vastly increased the price caps on the scheme.

01:43So it's going to enable more markets to be included here as well.

01:48And in that research that you've done, you found that Brisbane has, we'll see,

01:52the largest proportional increase for units available. What do you mean by that?

01:57So basically, when we look at the change in the portion of units that are eligible under the scheme,

02:03that goes up to almost 98% of unit markets. And this is significant because there's been big price

02:11increases across the city over the past five years, values rising over 70% across the entire dwelling

02:18market. So it's been very hard for prospective first home buyers to keep up. That expansion is going

02:24to probably boost demand in the short term, because there would be a lot of latent first home buyer

02:30demand of people that have been waiting to get into those markets.

02:35And what about houses? Where are you seeing the biggest change there in terms of that availability

02:39to first home buyers?

02:40So availability has gone up to almost 50% in Sydney, and that comes alongside a $600,000 increase

02:48to the price cap of the scheme across Sydney and certain regional centres in New South Wales.

02:56Having said that, though, because markets are rising, it could be that some suburbs fall out

03:04of that pretty quickly. So for example, if you take a market like Punchbowl, where houses are sitting

03:09just under that 1.5 million point, they're growing at a pretty significant pace, and by November

03:17could be outside the price threshold for this scheme.

03:20So it's hard to have price caps set, which can be lagging the movement in the market.

03:31And I guess that's why so many people are saying, if you want to take advantage of the scheme,

03:36you've got to get in quick.

03:37We've also got other areas. I mean, there's been the increase in Sydney, of course, but nearby

03:42areas come under that same boost in the property value that you can acquire.

03:47For example, the Illawarra, Newcastle, Lake Macquarie regions. That cap has increased to

03:52the $1.5 million mark as well.

03:55That's right. So that significantly increases the amount of markets that can be accessed in

04:00those major regional centres. It might even tempt some first home buyers into markets that

04:07are outside of Greater Sydney. And I think there's a lot of potential for unit markets to be utilised

04:14under the scheme as well, given there's so much coverage there.

04:18The Head of Research there at Cotality, Eliza Owen, great to have you with us. Thank you.

04:23Thank you. Take care.

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