The low property price caps in the First Home Loan Deposit Scheme means Sydney and Melbourne first-time buyers “might as well not waste their time” with the initiative, according to an awarded mortgage broker.
The government recently announced the maximum price cap for the scheme in Sydney will be $700,000 and in Melbourne $600,000.
Zippy Financial director and principal broker, Louisa Sanghera, has said it will be nearly impossible for most of Sydney, and a portion of Melbourne, to make a purchase within those parameters.
“I’m scratching my head as the scheme was clearly well-intentioned, with Sydney and Melbourne would-be property owners top of mind because of the high property prices in both cities,” Sanghera said.
“Yet now the price caps have been set so ridiculously low in these capital cities that most buyers won’t qualify anyway or, worse still, will end up buying a cheap and inferior property which may cost them far more in the long run.”
Sanghera worries that some FHBs will end up with their “first property investment being their worst”.
According to the CoreLogic Home Value Index for October, the median house price in Sydney is about $920,000 and the median unit price is $720,000.
In Melbourne, the median house price is $751,000 and the median unit price is $558,000.
“The price caps have been set well below the median house prices in both Sydney and Melbourne, with the median unit price in Sydney even above the maximum price allowed under the scheme,” noted Sanghera.
“However, in all other capital cities, the price cap is much closer to the median house price, and well below the median unit price.
“It seems the government has just picked a price out of thin air for Sydney in particular, because it doesn’t seem to reflect market reality – especially now that prices are firmly there again.”
Further, the scheme’s 10,000 borrower limit is low, especially when one considers there were nearly 10,000 FHBs in September alone, according to the ABS.
“The scheme could be here one month, gone the next, from the start of next year,” said Sanghera.
“If the government is serious about helping first home buyers, and I believe they are, they should seriously consider increasing the price caps in Sydney and Melbourne to be more realistic of current market conditions as well as significantly boost the number of guarantees on offer.”