There’s no denying it – buying your first home in a market of rising prices and housing shortages is tough. So tough that many first home buyers may wonder if it’s better to give up the home ownership dream altogether … and accept a life of renting.
But here’s the thing: when you buy property, you start building equity – the portion of the home you truly own as you pay off your mortgage. Over time, you own more of your asset outright, rather than helping someone else pay theirs off with your rental contribution.
Owning a home can set you up in so many ways – it could even be the difference between retiring comfortably or needing to keep working.
While some buyers get help from the Bank of Mum and Dad, many don’t have that option. But there are other ways that help you step onto the home ownership ladder.
First home buyer help
There are government incentives designed to give first home buyers a much-needed boost to break into the property market.
While some argue these schemes drive up property prices and make homeownership more costly long-term, these incentives are very popular, so let’s take a look at what’s available.
1. First Home Guarantee (FHG)
The FHG allows eligible buyers to purchase with as little as a 5 per cent deposit and no lenders mortgage insurance (LMI), which usually applies if your deposit is under 20 per cent. The government guarantees the remaining 15 per cent, helping you buy sooner.
Income caps apply: singles must earn under $125,000 and joint applicants under $200,000. Price caps also vary – $900,000 in Sydney, $700,000 in Brisbane, for example. There are 35,000 places available in FY 2024-25.
Please remember that a smaller deposit means a bigger loan. It’s still a good move to save as much of the deposit as you can, but also don’t wait for prices to jump before you move.
2.Regional First Home Buyer Guarantee (RFHBG)
Looking at a sea or tree change? The RFHBG offers similar support for regional areas, with 10,000 spots available this financial year.
Buyers need a 5 per cent deposit and must live in the home. Use Housing Australia’s eligibility tool to see if your location qualifies.
3. Family Home Guarantee
Designed specifically for single parents earning under $125,000, this scheme lets you buy with just a 2 per cent deposit and no LMI. Applicants must have at least one child under 18 and not currently own property.
4. First Home Super Saver Scheme (SSS)
Run by the ATO, this lets you withdraw up to $50,000 of voluntary super contributions for your deposit.
While I always say super is best left untouched – accessing it early is a bit like taking cookies out of the oven before they’re baked – this scheme could help some buyers get their foot in the property market door.
But do give your super strategy some thought first. For example, use the superannuation calculator on your fund’s website and work out the impact on your retirement payout of taking that $50,000 out early. Then work out the extra monthly or annual contributions you’d need to make to get back to that original pre-withdrawal level. Then automatically make those extra contributions so you end up having the best of both worlds … getting into the property market and retiring with a healthy balance.
You don’t want to miss out on the magic of compounding in your superannuation.
5. Help To Buy Scheme
This much-talked about scheme hasn’t rolled out yet, but applications are expected later this year. Similar programs (like Victoria’s Homebuyer Fund) will transition to the federal version and it will help out 40,000 households.
Help to Buy is a shared equity initiative – eligible buyers need just a 2 per cent deposit, and the government contributes up to 40 per cent of the property’s value.
Ahead of the federal election, Labor promised to raise property caps to reflect values. In Sydney, the cap is now $1.3 million and in Melbourne it’s $950,000.
6. State-based support for first home buyers
Alongside all the above, each state provides its own support for first home buyers through stamp duty concessions.
Many also offer incentives for purchasing newly built homes or buying vacant land to build on, as well as purchasing in regional areas. All are aimed at easing housing shortages and increasing supply.
Here’s an overview:
- NSW – Full stamp duty exemption when the property is under $800,000. Discounts up to $1 million valuation. $10,000 grant if purchasing or building a new home valued up to $750,000,
- Victoria – Duty exemptions under $600,000, concessions up to $750,000. $10,000 grant for new builds.
- Queensland – Stamp duty concessions under $700,000 (up to $24,525 saved). $15,000 – $30,000 grant for new builds.
- South Australia – Stamp duty relief, plus $15,000 grant for new builds, off-the-plan purchases, or vacant land.
- WA – Full duty exemptions under $500,000 (up to $18,000 saved), discounted to $700,000 ($750,000 in a regional area). Plus $10,000 grant for buying or building.
Seek advice
With the range of government assistance available, it’s worth exploring what first home buyer support you may qualify for, before deciding if homeownership really is out of reach (and if it really is, then this article on alterative ways to build wealth if you can’t buy property is for you)
