Housing affordability in Australia has been a popular topic. When we look at the data, we can see that housing affordability in Australia had been in decline for quite some time. Matter of fact, the dwelling prices in relation to income had an increase of 78% from 1980 to 2015 [1]. As a result, this has made it more difficult for a family unit to cover expenditures (prices, rents, and mortgages) with income as well as lowering the aggregate household savings rate [2].
Take the median house price in Sydney as an example – it rose from $64,800 in 1980 up to $999,600 in 2016[1]. As you can see, for some this can make entering the property market a bit of a challenge for first home buyers.
So what can a first-time homebuyer do at this point, when faced with this scenario? This article aims to provide some useful information.
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First Home Buyer Assistance Scheme in NSW
If you are buying your first home in New South Wales, you may be eligible to apply for the First Home Buyer Assistance Scheme (FHBAS) released by the NSW Government, and get a partial or full exemption on transfer duty.
It applies if:
- You’re buying an existing home;
- You want to purchase a new home;
- You’re looking to buy land on which you want to build your new home.
You will get a full transfer duty exemption for land purchases valued at less than $350,000 and will receive a concessional rate for valuations between $350,000 and $450,000. If you are buying a home, full transfer duty exemptions are awarded to valuations under $650,000, and partial exemptions are given to homes valued between $650,000 and $800,000.
You can find more information at the FHBAS online page [3].
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First Home Owners Grant (New Homes) Scheme
If you are looking to build or buy a new home and you are a first home buyer, you may qualify for the First Home Owners Grant (New Homes) Scheme, under which you can receive $10,000 as a one-off grant payment to help offset the cost of your purchase.
They will consider purchase prices under $600,000, but if you are buying land on which to build, the total price of land plus home can go up to $750,000 [4].
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First Home Loan Deposit Scheme (FHLDS)
This scheme will help up to 10,000 buyers per financial year purchasing their first property on which they intend to live, by providing a guarantee that will allow them to purchase their homes with a minimum deposit of 5 percent.
This can be:
- An existing house, apartment or townhouse;
- A house and land package;
- Land together with a separate contract to build a home and;
- An off-the-plan apartment or townhouse.
It is aimed at buyers on low and middle incomes, and it is an initiative of the Australian Government, starting on January 1st, 2020. The annual income limit is $125,000 for a single person and $200,000 for couples, but keep in mind that couples have to be married or in a de-facto relationship. The deposit will be between 5 and 2o percent of the valuation of the property you are looking to buy.
They want to make sure that this scheme is only available for those purchasing a modest home, or those buying land and building a modest home, so there are different property price limits for different regions.
The highest thresholds are in New South Wales, $700,000 in the capital city and regional centres with a population over 250,000 (such as Newcastle and Lake Macquarie) and $450,000 for the rest of the state. In comparison, the home price limit for someone looking to buy in the Northern Territory is $375,000.
Applications are not yet open, so keep an eye on their online page for updates [4,5].
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Apply for Lenders Mortgage Insurance (LMI)
If you do not have a 20 percent deposit to finance your first home, then lenders mortgage insurance may be the solution for you. It is an insurance policy that protects lenders from potential losses.
The two main insurers in Australia with this offer are Genworth and QBE Insurance Group. Check their websites for more information; they even have online estimation calculators you can use[6,7].
If your goal has been to own your first home, I hope this article helps you achieve this dream a lot of us have – let me know in the comments section if you have any other suggestions to make it just a little bit easier.
Chi Kiet Chau
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