On of the nation’s most awarded mortgage brokers is calling for the government to lift price caps on first home loan schemes, saying first-time buyers in Sydney and Melbourne might as well not waste their time.
Zippy Financial Director and Principal Broker Louisa Sanghera said the property price caps in the First Home Loan Deposit Scheme were set so low that it would be nearly impossible for most Sydney, and some Melbourne, buyers to purchase anything decent at all.
The Federal Government recently announced the maximum price cap for the scheme in Sydney is $700,000 and in Melbourne it is $600,000, she said.
“What I’m scratching my head about is that 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,” Ms 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.
“Some people are possibly going to 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, according to the index, 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,” Ms Sanghera said.
“However, in other all other capital cities, the price cap is much closer to the median house price, and well below the median unit price, in these locations.
“It does seem that 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.”
Ms Sanghera said the scheme would help first home buyers, however, most would likely be in more affordable locations, which seemed contrary to the scheme’s intentions.
Also, the government scheme, which guarantees first home buyer deposits from as low as five per cent, was likely to be exhausted quickly because of its 10,000 limit.
“To put this in perspective, there were just shy of 10,000 first home buyers in September, according to the Australian Bureau of Statistics, so the scheme could be here one month, gone the next, from the start of next year,” she said.
“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.”
