Last week the National Housing Finance and Investment Corporation Act 2018 was passed through both the upper and lower houses which will establish the First Home Loan Deposit Scheme.
This will enable the National Housing Finance and Investment Corporation (NHFIC) to give approximately 10,000 first home buyers per year, on low and middle incomes, the ability to purchase a home with a minimum deposit of five per cent instead of the current 20 per cent of the property’s value.
While the bank will still require the 20 per cent deposit, the government will provide a loan guarantee for the 15 per cent of the property’s value. The scheme will also remove the need for lender’s mortgage insurance, which is typically required for deposits under 20 per cent.
On average it can take West Aussies nearly nine years to save for a house deposit, which means this new scheme will allow a select few to get into the property market a lot sooner than expected.
First home buyers in WA
The 10,000 first home buyers will be split amongst the states which means there will only be approximately 1,250 West Aussies who could be potentially eligible for this each year – certainly not enough to help the struggling WA market.
In WA first home buyers play an important role in the real estate market as they account for one third of all residential property transactions. However, the number of first home owners has been on a downward trend with the number in 2018 reaching its lowest levels since 2011 at just 14,757.
What else can be done?
While this is a great initiative by the Coalition to potentially help boost first home buyer numbers in the state, more needs to be more done by the WA Government to help first home buyers and boost the state’s economy.
By incorporating the First Home Loan Deposit Scheme with initiatives such as increasing the stamp duty exemption threshold for first home buyers from $430,000 to $550,000, first home buyers will have the assistance they need to get into their own homes a lot quicker.
When does the scheme commence?
With the scheme due to commence on the 1 January 2020, a lot still needs to be worked out by the NHFIC and communicated to the public.
What we do know is that those eligible are single first home buyers earning up to $125,000 and couples taking home up to $200,000 annually. It is also expected that a price cap will be put in place subject to the area and for Perth this would be a lot lower than someone purchasing a home in Sydney.
For those who are considering applying for the scheme when it becomes available, make sure to speak with a REIWA agent or your mortgage broker to see if this is the best option for you.
For advice on buying your first property, check out REIWA’s WA first home buyers guide.
Read the full media release from the Minister of Housing and Assistant Treasurer, The Hon Michael Sukkar MP.