First Home Guarantee: Suburbs eligible for Government scheme to triple in October with cap raised to $850k

The number of suburbs with houses eligible for the Federal Government’s First Home Guarantee will nearly triple in October. New research by Cotality, compiled exclusively for The West Australian, shows the number of suburbs with median-priced houses or units which fall within the guarantee price threshold will increase from 58 to 153 next month. The price threshold increases from $600,000 to $850,000 on October 1, which means the number of suburbs where first home buyers are likely to find homes that are eligible under the scheme will surge. The scheme allows those buyers to purchase a property with as little as a 5 per cent deposit without incurring costly Lenders Mortgage Insurance. It alleviates the need for a 20 per cent deposit, which is worth $160,000 on a $800,000 property. Income caps on applicants will also be removed from the scheme next month. Cotality economist Kaytlin Ezzy said the upcoming changes will boost demand from first home buyers. “The expansion of this scheme will almost certainly increase housing demand from first home buyers, which will likely put upward pressure on values,” she said. “While most first home buyers will likely continue to skew towards the more affordable end of the market, the increased price caps means that those utilising the scheme will have more options.” Under the current limits, only Mandurah and Medina have median house prices which fit under the price cap, but the amended threshold will mean applicants will most likely be able to find eligible houses in dozens of new suburbs, including Ferndale, Ballajura, Bentley, Redcliffe, Viveash, Caversham, Cockburn Central Forrestdale and San Remo in Mandurah. Under the current price cap, units in only 56 suburbs — including Joondanna, Victoria Park, Mount Lawley and Inglewood — fit under the threshold. Ms Ezzy said it would give entry-level buyers extra choices as to where they can buy, under the scheme. “Previously first home buyers either had to pay Lenders Mortgage Insurance, fight it out for the limited places under the previous rules, or rely on the bank of mum and dad in order to get into the market without the full 20 per cent deposit,” she said. “The expansion of the scheme means that those without parents who can help will be on a more equitable footing without having to restrict their purchasing choices to — what was under the previous caps — slim pickings.” While analysts broadly anticipate the change will put pressure on prices, Ms Ezzy said any change would be mitigated by affordability constraints. “I do think that affordability will continue to keep runaway value growth in check,” she said. “While the scheme will give first home buyers a leg up, they will still need to qualify for the loan amount and show they are able to afford the repayments which we would expect will keep the rate of value growth somewhat in check.”