First-home loan deposit scheme recipients tipped to miss out on buying amid COVID-19 restrictions

First-home buyers approved for a government loan scheme are concerned they may miss out on buying a property before their place in the scheme expires, as COVID-19 social distancing measures make house-hunting a challenge. 

The First Home Loan Deposit Scheme, available from the beginning of this year, allows eligible first-home buyers to take out a mortgage with a 5 per cent deposit, as the government goes guarantor for the remaining 15 per cent.

Only 10,000 places were available nationwide and successful applicants were supposed to find a property within 90 days of being approved. 

But with strict new bans on public auctions and inspections being enforced from Wednesday night, first-home buyers could find themselves house-hunting in a very different and increasingly uncertain property market, Domain economist Trent Wiltshire said.

He said not only would the increasingly stringent social distancing measures have an impact on first-home buyers’ ability to find a property, but that the overall economic outlook may make potential buyers think twice about stepping on to the property ladder. 

“It looks like the economy’s going to slow dramatically, with people losing their jobs, buyers are going to be a lot more cautious about buying and may hold off for a while,” Mr Wiltshire said.

One of the big banks offering the loans, NAB, confirmed it had received queries from scheme recipients about a potential extension of the 90-day expiry period.

It is believed there is no plan for the 90-day cut-off to buy a property to be extended, but a NAB spokesman said the bank was working closely with the government to “do what is right for our customers as the current environment evolves”. 

The scheme was extremely popular from its inception, with 3000 places being taken in the first week and a half of January. At the beginning of this week, 7661 places were taken – with more than 4700 still without a property. 

Successful applicants who let the 90-day cut-off lapse can apply again, according to the National Housing Finance and Investment Corporation (the government body in charge of the scheme), either right away — as there were still some remaining places — or in July when another 10,000 places are set to open up.

Mr Wiltshire said  it was unlikely the second round of places offered in July would attract as much competition as the January round, given the adverse effect COVID-19 would have on the property market. 

“I don’t think we’ll see what we saw in January, where all the spots were snapped up really quickly,” he said.

Real Estate Buyers Agents Association president Cate Bakos said first-home buyers who had gained a place in the scheme were in a unique position now to snap up a property for a relatively low price.

Ms Bakos said: “I’ve had a couple of people ask me ‘how am I going to find a property?’ Provided they are actively inspecting, either with private inspections, with a buyer’s agent or virtual inspections, there is some increased opportunity to buy at the moment.” 

But she said if there was a complete lockdown due to COVID-19, the property market would likely grind to a halt, with no transactions taking place until the lockdown was lifted – meaning many scheme recipients would not be able to buy before the expiration date. 

“Buyers are generally loath to buy sight-unseen,” Ms Bakos said. 

Sydney-based agent Michael Murray, of Murray Property, said despite the COVID-19 social-isolation rules, there had been increased interest from buyers in the past few weeks – with one of his sellers actually upping their asking price due to a strong offer.  

“There’s a lot of uncertainty, but with the stock market being so volatile, some people are seeing bricks and mortar as a safer option,” Mr Murray said. 

Housing minister Michael Sukkar was contacted for comment.