First Home Loan Deposit Scheme: Where can buyers find a home?

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on February 20, 2020
First Home Loan Deposit Scheme: Where can buyers find a home?

Photo by Maximillian Conacher on Unsplash

First home buyers purchasing a home under the First Home Loan Deposit Scheme may be limited to the outer fringes of capital cities.

According to analysis by Domain, first home buyers will only be able to buy between 35-40% of properties up for sale in most capital cities.

Domain economist Trent Wiltshire said the First Home Loan Deposit Scheme was designed to allow people to purchase a "modest" home. 

"We analysed property sales in each capital city between July 1 and December 31 last year to see how many and what type of property a successful applicant can buy under the price caps," Mr Wiltshire said.

"There were fewest options in Canberra, with 34% of sales below the city's cap price, while Brisbane had the greatest proportion of sales under the price threshold."

Unsurprisingly, first home buyers have greater choice in units and apartments for sale in capital cities.

In Darwin, for example, 70% of units sold were under the threshold, while 48% were under the price cap in Sydney.

But far fewer houses fall under the price thresholds.

"Despite the lack of house options available, 70% of scheme commitments so far have been for houses, suggesting people are looking beyond the capital cities to buy a home using the scheme," Mr Wiltshire said. 

With house prices rapidly rising, it's possible the number of properties buyers can purchase under the scheme will only decline even further.

"If Domain's price forecasts eventuate, in Sydney about 27% of properties sold will be under the price cap in December 2020, down from 36% in the second half of 2019," Mr Wiltshire said. 

"In Melbourne and Brisbane, the proportion of sales below each city’s price cap will be about 28% and 33% respectively, down from 37% and 41% in the second half of 2019."

Mr Wiltshire said while the scheme is helpful, it's not a solution to Australia's housing affordability problems.

"The scheme will help some first-home buyers get into the market earlier, and these people will benefit if prices rise," he said. 

"But the scheme also adds to demand and so contributes to higher prices, which is not ideal when interest rates are falling and prices are rising rapidly. 

"So while helpful for some individuals, this scheme is not a solution to Australia’s housing affordability problems."

The scheme, which was launched on 1 January, aims to give eligible first home buyers the chance to purchase a home with a deposit as low as 5% without having to pay Lenders Mortgage Insurance (LMI). The government essentially acts as guarantor for the remaining deposit amount.

Since launching, the scheme has proved to be very popular, with over 6,500 of the 10,000 places already reserved.

Surprisingly, 11% of applicants for the scheme were between the ages of 40-59., while the majority of applicants (55%) were aged between 18-29. 

Figures from the Housing Minister showed that many applicants are looking to buy outside the major cities in regional centres and rural areas. 

Thinking about refinancing to a low-rate, variable owner-occupier home loan? Below are a handful of low-rate loans in the market. 

Lender

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
ZERO APPLICATION FEESFEE FREE OFFSET
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO APPLICATION FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO APPLICATION FEES

Yard Home Loan (Principal and Interest) (Special) (LVR < 80%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO UPFRONT OR ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO UPFRONT OR ONGOING FEES

Owner Occupier Accelerates - Evaporate (LVR 60%-70%) (Principal and Interest)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO UPFRONT OR ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO UPFRONT OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 80%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
UNLIMITED EXTRA REPAYMENTS
UNLIMITED EXTRA REPAYMENTS

Basic Home Loan (Principal and Interest) (LVR < 60%)

    Variable
    More details
    EASY DIGITAL APPLICATION
    EASY DIGITAL APPLICATION

    Neat Variable Home Loan (Principal and Interest) (LVR 70%-80%)

      Variable
      More details
      $0 APPLICATION FEE
      $0 APPLICATION FEE

      Budget Home Loan (Principal and Interest) (LVR < 80%)

        Variable
        More details
        100% FULL OFFSET ACCOUNT
        100% FULL OFFSET ACCOUNT

        Offset Package Home Loan (Principal and Interest) (LVR < 60%)

          Variable
          More details
          LIMITED TIME OFFER
          • Fast turnaround times, can meet 30-day settlement
          • No ongoing or monthly fees, add offset for 0.10%
          • Extra repayments + redraw services
          LIMITED TIME OFFER

          Smart Booster Home Loan Discounted Variable - 1yr

          • Fast turnaround times, can meet 30-day settlement
          • No ongoing or monthly fees, add offset for 0.10%
          • Extra repayments + redraw services

          Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of May 24, 2022. View disclaimer.

          Sydney

          Property price cap: $700,000

          "Buying a home using the scheme, particularly a house, will be near impossible in many parts of the north shore, northern beaches, eastern suburbs and inner west," Mr Wiltshire said. 

          According to the analysis, only 2% of homes in the Manly region are under the $700,000 threshold (0% of houses and 4% of units). 

          The options are also pretty dismal in:

          • Leichardt (5%)
          • Pittwater (5%)
          • Baulkham Hills (4%)
          • Eastern suburbs (7%)

          Head a bit further out and the options suddenly open up, particularly in Sydney's western and southern suburbs:

          • Mount Druitt region (87%)
          • Richmond-Windsor region (81%)
          • Campbelltown (81%)

          Melbourne

          Property price cap: $600,000

          For first home buyers in Melbourne, the western and northern suburbs are where it's at. These include areas like:

          • Tullamarine-Broadmeadows (68%)
          • Sunbury (65%)
          • Melton-Bacchus Marsh (65%)
          • Wyndham (64%)

          Unsurprisingly, Melbourne's inner, east and bayside regions had very few properties for sale that fell under the scheme's price caps. Almost no houses were under the property price caps. 

          • Manningham-East (1%)
          • Bayside (8%)
          • Monash (7%)
          • Keilor (9%)

          Brisbane

          Property price cap: $475,000

          It seems Brisbane is the city for first home buyers using the scheme, with 41% of dwellings sold falling under the $475,000 price threshold. 

          Looking further out, regions in the outer west and outer south provide the most choice, including:

          • Beaudesert (83%)
          • Ipswich inner (71%)
          • Ipswich Hinterland (74%)
          • Beenleigh (81%)
          • Browns Plains (81%)

          Only 8% of properties fell under the price threshold in Kenmore-Brookfield-Moggil. There were only 12% of properties under the price caps in The Gap-Enoggera area. 

          In the inner city of Brisbane, 39% of properties fell under the price cap, but Mr Wiltshire said this was mainly due to the "plethora of affordable units". Around 45% of units sold under the price threshold, compared with just 7% of houses.

          "It was a similar story in neighbouring inner city areas, with Brisbane's apartment construction boom creating lots of affordable apartment options," Mr Wiltshire said.

          Perth

          Property price cap: $400,000

          "Perth is the second-least accessible market under the scheme," Mr Wiltshire said.

          Suburbs in the exclusive western suburbs and near Fremantle provide the least amount of choice for first home buyers using the scheme:

          • Cottesloe-Claremont (6%) and only 1% of houses
          • Fremantle (12%)
          • Melville (9%)
          • Northern Joondalup (13%)

          The best areas for first home buyers using the scheme are in the south of the city:

          • Kwinana (82%)
          • Rockingham (66%)
          • Mandurah (61%)

          Adelaide

          Property price cap: $400,000

          First home buyers in Adelaide have the best chances in the northern suburbs:

          • Playford (87%)
          • Salisbury (76%)
          • Gawler-Two-Wells (65%)

          There are very few options in the inner south and east regions:

          • Toorak Gardens (13%)
          • Glen Osmond (13%)
          • Kensington Gardens (13%)
          • Campbelltown region (14%)

          Hobart

          Property price cap: $400,000

          In the Brighton region, 72% of properties sold fell under the price cap. 

          On the other hand, only 12% of properties in the inner suburbs were below the property price cap and only 4% of units. 

          "Given Hobart's rapid price growth in the second half of 2019, an even smaller proportion of properties will currently be available to first home buyers," Mr Wiltshire said.

          Canberra

          Property price cap: $500,000

          According to Domain's analysis, in all Canberra districts (except Weston Creek) 30-40% of properties sold were under the price cap. 

          But in most regions, very few houses were under the price cap. Only 3% of houses sold in South Canberra fell under the price cap.

          Only 11% of properties in Weston Creek were under the price cap.

          Darwin

          Property price cap: $375,000

          First home buyers stand a decent chance of getting a property in Darwin, where 39% of properties sold fall under the price cap. 

          Darwin's inner city holds the most promise for first home buyers, with 51% of properties under the price caps. 

          However, only 16% of properties sold in Litchfield fell beneath the price thresholds. It's important to keep in mind only five apartments actually sold in this area in the second-half of 2019 though.


          Disclaimers

          The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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          author-avatar
          Emma Duffy is Assistant Editor at Your Mortgage and  Your Investment Property Mag, which are part of the Savings Media Group. In this role, she manages a team of journalists and expert contributors committed to keeping readers informed about the latest home loan and finance news and trends, as well as providing in-depth property guides. She is also a finance journalist at Savings.com.au which she joined shortly after its launch in early 2019. Emma has a Bachelor in Journalism and has been published in several other publications and been featured on radio.

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