First Home Loan Deposit Scheme

UDIA National made a submission to the Inquiry into the provisions of National Housing Finance and Investment Corporation Amendment Bill 2019.

Our position on the First Home Loan Deposit Scheme is that it is a positive concept – and sits well alongside other initiatives including retention of negative gearing, funding for housing supply and demand analysis and the relaxed loan interest rate serviceability requirements recently announced by APRA.

It sensibly recognises that the barriers to entry to housing markets are real, substantial and immediate – and supply-based measures (such as planning reform to boost supply) will take time to give effect to improved affordability.

Often, the biggest barrier to home ownership is the scale of savings required to meet the standard requirement for a 20 percent deposit. This serves as both a pre-requisite for the majority of home lending, as well as avoidance of mortgage insurance.

Some state governments have sought to also assist in closing the deposit gap, with Western Australia’s Keystart the most notable (although the Northern Territory and South Australia also have their own versions of the Keystart program).

Keystart’s precise design and operation is different from the proposed Commonwealth scheme, but its intent is the same and has had sustained success for more than 20 years in increasing home ownership among first homebuyers.

Therefore, the merits of the concept being pursued by the Commonwealth should be uncontested.

Recognising the limitations of the scheme as it is currently proposed, UDIA recommends that the Commonwealth:

  • invests in analysis to provide a variable set of thresholds across capital cities (and regions) that reflect the income thresholds required to access housing with serviceable mortgages
  • considers lifting thresholds for Sydney and Melbourne to better align with median house price requirements, and
  • expand the mandate to include capacity for shared equity arrangements. This would replicate the Shared Ownership Home Loan provisions of the Western Australian Keystart program – under which co-ownership of the property up to a 30 percent value is available.

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