New FHLDS price caps welcomed

The federal government has confirmed new property price caps for the First Home Loan Deposit Scheme (FHLDS) and the Family Home Guarantee, which apply from 1 July 2021.

While the National Housing Finance and Investment Corporation (NHFIC) had released property price thresholds for the new Family Home Guarantee earlier this month, the Treasury confirmed over the weekend that it is increasing the price caps for most states and territories (except ACT).

Limits will increase by at least $50,000 (depending on location). The largest increase is for properties in small regional areas in NSW (population under 250,000 people), where caps will increase by $150,000 to $600,000.

ACT is the only area to hold its property price cap next financial year, remaining at $500,000.

For the next 10,000 places issued under the FHLDS and the new Family Home Guarantee in the new financial year, property price caps will be as follows:

The capital city price thresholds also apply to regional centres with a population over 250,000, “recognising that dwellings in regional centres can be more expensive than other regional areas”.

Regional centres include: Newcastle and Lake Macquarie; Illawarra (Wollongong); Geelong; Gold Coast and Sunshine Coast.

The move comes following criticism that the caps were too low in some cities, particularly given that the average house price in NSW has now surpassed $1 million for the first time.

Speaking of the new caps, Assistant Treasurer and Minister for Housing Michael Sukkar MP commented that the new caps would “ensure that people can continue to purchase a home, as well as accommodate larger families under the Family Home Guarantee”.

‘Fantastic news for first home buyers’

Several lenders have welcomed the new caps, with Michael Baumann, executive general manager home buying of the Commonwealth Bank of Australia (CBA), stating: “[This] announcement from the government to increase the property price caps under the First Home Loan Deposit Scheme (FHLDS) and Family Home Guarantee will allow customers to continue to realise the dream of owning their own home.

“We have helped more than 6,000 customers purchase a home under the various schemes and welcome measures that help first home buyers enter the property market.”

He highlighted the bank’s range of products that were helping customers purchase a home, adding: “We encourage customers to speak to a CommBank lender or broker to apply for one of the spots that will be made available from 1 July 2021.” 

Similarly, NAB’s executive, home ownership, Andy Kerr, told Mortgage Business: “The higher price caps are fantastic news for first home buyers. It will provide greater flexibility for Australians looking to purchase their first home through the scheme.

“Over the past year, we have seen record demand from first home buyers, with NAB lending increasing by 67 per cent compared to 2020. The scheme has played a key role in providing more opportunities for Australians.

“We have just reopened our doors to customers interested in buying their first home through the scheme. Demand remains incredibly strong,” he said.

“So far, NAB has supported 6,250 Australians into their first home with the help of the FHLDS, and we look forward to supporting thousands more.”

Members of the building and housing industry have also welcomed the new price caps.

Kristin Brookfield, the chief executive of industry policy at the Housing Industry Association (HIA), noted: “Buyers accessing the guarantee to date have generally been on lower incomes and bought homes below the price caps. 

“Increasing the price caps for this next tranche is an important recognition that house prices have been changing due to the impacts of the pandemic. 

“The adjustment of the price caps for the complementary new scheme announced in this year’s budget, the Family Home Guarantee, also makes good sense,” she continued.

“The 10,000 Family Home Guarantee places will help the ‘missing middle’ of home buyers – families who have owned previously but are struggling to get back into the market. Today, there is no other support for this group of aspirational home buyers.” 

Similarly, Denita Wawn, CEO of Master Builders Australia, said: “Providing more people with the support to make the step up to owning a home is also fundamental to a stronger economy which benefits the whole community.

“Lifting the price caps for these schemes will also make them more accessible to more people, and that’s a very good outcome,” she continued.

New Home Guarantee construction extension

The FHLDS (New Homes) scheme (also known as the New Homes Guarantee), which was launched last year, will also be expanded for a second year, providing an additional 10,000 places in 2021-22.

It will provide an additional 10,000 places for first home buyers seeking to build a new home or purchase a newly built dwelling with a deposit of 5 per cent, and the construction commencement time frame has been extended from six months to 12 months.

Ms Brookfield commented: “The success of HomeBuilder has placed pressure in the supply chain for builders, contractors and suppliers, making it important to provide time for new home projects under this program to start work. Extending this from six months to 12 months is critical right now.  

“All three programs under the First Home Loan Deposit Scheme offer a practical way to reduce the time people spend saving a deposit to buy their home, particularly their first home. Putting their savings directly into a home loan, up to six years earlier, helps to keep first home buyers ahead of changes in house prices, achieve home ownership sooner and build their financial security faster.”

The New Homes Guarantee price caps remain the same, and are as follows:

Minister Sukkar said: “Through our First Home Loan Deposit Scheme and the New Home Guarantee Program, the Morrison government is helping more first home buyers and single parent families overcome the challenges of saving for a deposit and realising the Australian dream of owning your own home.

“With the 30,000 new places available from 1 July, now is the time for potential applicants to contact a participating bank or mortgage provider and get their applications underway.”

[Related: Housing values record biggest quarterly rise: ABS]