New hope for first-time NSW home buyers with government equity scheme

First-time home buyers in NSW will be able to use a state government contribution towards their security deposit under a new scheme to address the affordability crisis.

First-time home buyers in New South Wales will be able to use a state government contribution towards their security deposit in exchange for handing over some of the equity in the property.

The Sydney Morning Herald reports that the scheme, under Prime Minister Dominic Perrottet, will help solve Sydney’s affordability crisis, and that equity – the difference between the value of your home and the amount you have left to pay on your state-owned mortgage – would be repaid in installments or when the property was sold.

The scheme would include equity in an existing home, land on which a buyer is building a home, or equity in a guarantor’s home. Parents of first-time home buyers could also donate their home equity to the state government to help their children purchase property.

The final details of the policy – including whether there would be a cap on the amount the government would contribute or the price of the property or land – are still being worked out.

Mr Perrottet said the government had a responsibility to develop better ways to help people enter the housing market.

“More and more younger generations think that being able to buy their first home is unachievable, and for me, that’s unacceptable,” said the Prime Minister.

“As a parent, I would gladly sacrifice some of the equity in my home if I knew it would give my children a foot in the door of our state’s real estate market.”

The looming crisis in housing affordability – a key focus for Mr Perrottet – is likely to be a “significant concern” ahead of next year’s election, Urban Taskforce CEO Tom Forrest previously warned. one of the main organizations of real estate developers.

Referring to ABS statistics at the time which showed approvals had plummeted at the end of 2021, Mr Forrest called it a “clear warning” to the Prime Minister “that as he focuses on economic recovery in the post-Covid period, there must be a very clear emphasis on flexibility in the planning system and the delivery of housing supply”.

Analysis by Moody’s Investors Service in October last year found that housing affordability had deteriorated to its worst level in a decade in Sydney, despite historically low interest rates, the median price of real estate reaching $1.3 million.

That means a household with an annual income of $135,000 will spend more than 45% of their money paying their new mortgage, a dramatic increase from February when they needed 36% of their income.

In other bad news, Sydney is likely to hit its worst housing affordability in a decade if prices rise by a relatively small amount again, as low interest rates are not enough to offset steep house price increases, according to Moody’s.

“In Sydney, home affordability is at its worst than at any time in the past decade. According to our modelling, Sydney will reach its worst housing affordability in 10 years if prices increase by 4.6% or average mortgage rates increase by just 0.42 percentage points to 3.87%,” said Moody’s analyst Pratik Joshi.

“Australia would average its worst affordability in a decade if house prices rose 15% or the mortgage rate hit its 10-year average of 4.79%.”

NSW Treasurer Matt Kean said home ownership was “one of the biggest intergenerational challenges of our time”.

“We need to make sure that every Australian who is working hard to get ahead can buy a home, because buying a home is more than owning a home, it’s buying a stake in the future of our country” , did he declare.

“Homeownership is a problem that will take time to solve, which is the very reason we need to start now.”

Ashley C. Reynolds