Home buying scheme price caps to be boosted

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Home buyers have been targeted by a new pre-election pledge from the Coalition to increase the property price caps available with the Home Deposit Scheme.

Under the scheme - which encompasses the First Home Guarantee, Family Home Guarantee and Regional Home Guarantee - the government guarantees home loans of eligible buyers with deposits as low as 5% (or 2% with the Family Home Guarantee), eliminating the need for lenders mortgage insurance.

The changes, which are set to kick in from July 1, will lift the existing price thresholds in most metro and regional areas meaning that eligible home buyers will be able to purchase homes with price tags as high as $900,000 in Sydney and $800,000 in Melbourne.

Australian apartment for sale

The largest adjustment will impact prospective buyers in Canberra though, with the price cap in the nation's capital set to be raised from $500,000 to $750,000.

Home Guarantee Scheme - Capital city and regional centre caps

  New cap (2022-2023 FY) Increase
NSW $900,000 $100,000
VIC $800,000 $100,000
ACT $750,000 $250,000
QLD $700,000 $100,000
SA $600,000 $100,000
WA $600,000 $100,000
TAS $600,000 $100,000
NT $600,000 $100,000

In announcing the move, Assistant Treasurer and Minister for Housing Michael Sukkar said that the changes reflected rising property prices.

"As a Government we fundamentally believe in the aspiration of home ownership, with people being able to build a place of their own and invest in their future."

"We acknowledge how hard it can be to buy a new home or re-enter the housing market and that saving a deposit is the hardest part of getting into home ownership. By adjusting the price caps for the Home Guarantee Scheme, we are ensuring Australians have more options when buying a home."

While tens of thousands of home buyers have participated in the scheme since it was launched two years ago, there are concerns that it's doing little for the larger issue of housing affordability.

"Programs like this only further inflate prices, ultimately making it harder for home buyers to get into the market," says Kate Colvin, national spokesperson for Everybody's Home - a national campaign aimed at solving housing issues in Australia.

"What we really need is investment to build more social and affordable houses. That's the best way to ease the surging cost of rent for people on modest incomes."

Since December 2019 figures from the Australian Bureau of Statistics show that the average price of a residential home has increased from $686,800 to $920,100.

From a buyer's perspective that price increase means that the money required for 5% deposit on an average home has jumped by close to $12,000 over the period, while a 20% deposit is now $46,000 dearer.

To learn more about the Home Deposit Scheme, including the full range of price caps and eligibility requirements, head on over to the National Housing Finance and Investment Incorporation website.

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Tom Watson is a senior journalist at Money magazine, and one of the hosts of the Friends With Money podcast. He's previously worked as a journalist covering everything from property and consumer banking to financial technology. Tom has a Bachelor of Communication (Journalism) from the University of Technology, Sydney.

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