Key facts
- The Australian government's 5% deposit scheme for first home buyers has seen a surge in participation from higher-income earners following the removal of income caps.
- Data from Housing Australia indicates that between October and April, thousands of single borrowers earning over $125,000 and joint borrowers earning over $200,000 utilized the scheme.
- Economists Saul Eslake and Amy Auster have raised concerns that the scheme's expansion may be inflating property prices and increasing debt for borrowers who would have purchased homes regardless.
- The government also increased the price caps for properties eligible under the scheme.
- Analysis suggests that the scheme has primarily been adopted by existing first home buyers, with a less significant impact on overall home ownership rates.
Australia's government-backed 5% deposit scheme for first home buyers is increasingly being utilized by individuals and couples earning significantly more than previous income caps, according to data seen by Guardian Australia. The scheme, which allows eligible buyers to purchase a home with a minimal deposit and has the government cover lenders' mortgage insurance, had its income restrictions removed by the Labor government last year.
Data from Housing Australia reveals that from October to April, 39,704 loans were backed by the government. Of these, 13,979 exceeded the former income caps, with 6,812 single borrowers earning over $125,000 and 7,167 joint borrowers earning over $200,000. Notably, nearly 1,000 single individuals earning $200,000 or more and 1,251 couples earning $275,000 or more benefited from the scheme.
Economists like Saul Eslake and Amy Auster have expressed concerns that the removal of income caps has directed government support towards individuals already in strong financial positions. Auster noted that government support traditionally targets those most in need, and while efforts to support first home buyers are understandable, the fundamental housing problem remains unsolved. Eslake argued that expanding the scheme allows people to spend more on housing than they otherwise would, contributing to the ongoing housing affordability crisis.
He illustrated this by noting that a borrower with $50,000 in savings, who might only be able to borrow $200,000 with a 20% deposit, could borrow $1 million under the 5% deposit scheme. Property prices have seen significant increases since the scheme's expansion and the lifting of price caps, which now include homes up to $1.5 million in some major cities. Data from Cotality shows that properties eligible for the scheme experienced slower price growth initially but accelerated significantly after the scheme's expansion.
While the scheme was promoted to lower the deposit hurdle, analysis suggests it has largely been adopted by existing first home buyers. The average monthly uptake of the 5% deposit scheme loans was 5,670 from October to April, compared to an average of 10,181 total first home buyer loans per month from October to March. This suggests a modest impact on overall home ownership, with first home buyer activity reportedly declining as the housing market enters a downturn.