First Home Buyers might be sleepwalking into ‘catch 22’, says expert

by Mike Wood25 Jun 2021

Australia’s First Home Buyer (FHB) schemes have come under scrutiny in a new report, with the moves to improve access to home ownership being described as a “catch 22” by a leading expert.

PRD, a major real estate firm, has released a report in response to recent rises in the price caps for those accessing government support under the scheme, which can allow FHBs to pay just 5% ona  new build home.

According to PRD’s Chief Economist, that can leave buyers in a dangerously large amount of debt, having purchased their home before they were perhaps ready to.

“We wanted to raise awareness on what is in the current government schemes designed to increase access to home ownerships, and if people are aware of the flipside of it in terms of how much debt they might be in after they have access to the incentives,” said Dr Diaswati Mardiasmo, Chief Economist at PRD.

“When it comes to government schemes, a lot of people look at it and think ‘great, the government is helping us to get into the property market’ and doing something about access to home ownership. They only see that side of the scheme.”

“But this report raises awareness of the new price cap for how expensive a property you can buy for the different schemes and in different areas, and has some case studies. If you were a first home buyer in Lake Macquarie, you’re accessing a scheme and you’ve maxed out the property price that you can get under it, what sort of mortgage are you going be able to get? “

“We’ve played around with a few scenarios, and it’s about highlighting that, while people might be able to achieve home ownerships and get the home that they want quicker, the flipside is that they half a million dollars in debt, because they are doing it right now, and asking if people are aware of that.”

“It’s more about raising that awareness that there might be a Catch 22 in these schemes, and making sure that anyone who is thinking about accessing it thinks about what is on the other side.