A federal government scheme designed to help first-home buyers enter the market is being used by high-income earners and contributing to rising property prices, a new analysis has found.
Report reveals scheme's unintended consequences
The First Home Loan Deposit Scheme, which allows eligible buyers to purchase a home with a deposit as low as 5% without paying lenders mortgage insurance, was intended to assist those struggling to save for a deposit. However, a report by the Australian Housing and Urban Research Institute (AHURI) found that the scheme is disproportionately benefiting higher-income households and adding to price pressures.
According to the report, nearly 40% of participants in the scheme had incomes above the median, with some earning more than $120,000 a year. The scheme has no income cap, meaning high earners can access the benefits alongside those with lower incomes.
Impact on property prices
The report estimates that the scheme has increased house prices by between 1% and 3% in major cities, particularly in Sydney and Melbourne. This price inflation undermines the scheme's goal of improving affordability for first-home buyers. "The scheme is effectively subsidizing demand without increasing supply, which pushes prices up," said Dr. Rachel Ong, the report's lead author.
The analysis also found that the scheme has been used more in higher-priced suburbs, with the average loan size under the scheme exceeding $500,000 in some areas. This suggests that the scheme is helping buyers purchase more expensive homes rather than enabling those on lower incomes to enter the market.
Calls for reform
Housing advocacy groups are calling for the scheme to be reformed, including introducing an income cap and targeting support to those who need it most. "This scheme is a missed opportunity to help the people who are really struggling," said Kate Colvin, spokesperson for the National Shelter network. "Instead, it's adding fuel to the fire of rising house prices."
The federal government has defended the scheme, arguing that it has helped over 100,000 Australians buy their first home. A spokesperson for the Housing Minister said the government is committed to reviewing the scheme's effectiveness but noted that it remains popular among first-home buyers.
Broader housing affordability concerns
The findings come amid ongoing concerns about housing affordability in Australia, where prices have surged over the past decade. The report highlights the need for policies that address both demand and supply sides of the market. "Without increasing housing supply, demand-side subsidies like this scheme will continue to push prices higher," Dr. Ong added.
The AHURI report recommends that the government consider measures such as increasing social housing, reforming zoning laws, and targeting assistance to low- and moderate-income households to improve affordability.
