First-home buyers snapping up property with First Home Loan Deposit Scheme despite coronavirus crisis

It’s not a tale told often but Rayen Gouli and his wife Sabina Lama bought their first home much sooner than they expected to.

The couple were one of thousands of first-home buyers approved for the federal government’s First Home Loan Deposit Scheme that was introduced in January.

The scheme allowed the couple to buy their three-bedroom home in the Melbourne suburb of Wollert with a 5 per cent deposit with the federal government as a guarantor for the remaining 15 per cent – meaning they didn’t need to pay lender’s mortgage insurance. 

“Our timeline for saving was brought forward by about eight to 12 months,” Mr Gouli told Domain. 

Of the 10,000 places available, the latest statistics from federal Minister for Housing Michael Sukkar show that nationally 4147 certificates have been issued for those who have already bought a property.

A further 3909 places are on hold waiting for the purchase of a property while only 1944 places are still available. However, they may not be around for much longer, with applications via 27 different lenders still being worked through.

Each state has seen successful applications with the top three being NSW, where 1397 certificates have been issued after settlement of a property, Queensland with 1119 and Victoria with 951, as of April 20.

And while the coronavirus outbreak has affected the property market, agents and experts say first-home buyers are still buying, even if it is at a much slower pace.

40Forty Finance director and mortgage broker Will Unkles said he had been “busier than ever” helping first-home buyers with their loans despite the impacts of social distancing on the market.

“For the first few weeks [of the crisis], first-home buyers disappeared but those who have a 10 per cent or 20 per cent deposit have now increased,” Mr Unkles said.

While the scheme had helped people get into their first home sooner, in the current market Mr Unkles said he was recommending caution for new applicants.

“My recommendation is be very cautious because with a lower deposit, you’re borrowing a larger amount of money against the property’s value,” Mr Unkles said. 

“With properties expected to drop in value over the next six months, and perhaps for even longer, that means you could be borrowing more than what the house is worth.”

Bombay Real Estate director Ravi Kapoor, who works in Melbourne’s outer north where Mr Gouli and his wife bought, said the market was still ticking over, although it was not as busy as it had been previously.

“The number of inquiries are less – it’s probably 50 per cent down because of the coronavirus,” Mr Kapoor said. 

However, there were still first-home buyers looking to get into the market and find a bargain, given prices were expected to fall in the coming months. 

This week the CBA is celebrating its 1000th customer successfully purchasing a home under the scheme. 

Group executive of Retail Banking Services with CBA Angus Sullivan said it was an important milestone to recognise under the circumstances.

“There is a lot of interest and uncertainty about the impact the coronavirus will have on the Australian property market so it’s encouraging that we have crossed this exciting milestone in the current environment,” Mr Sullivan said.

CBA’s statistics show that, like the federal government figures, more than half of such borrowers (55 per cent) were single and on an average income of $78,229, while couples made up 45 per cent and had an average combined wage of $124,000.

The average loan size varied by state with those in NSW spending $511,559 on property, while Queensland first-home buyers spent an average of $356,955. 

First-home buyers in Victoria, borrowing through CBA, were purchasing a home with an average price of $457,139.

For first-home buyers who had reserved a place under the scheme but not yet found a property, they could request to extend the deadline for another 90 days if they were finding it difficult in the current market, Mr Sullivan said.

“We also realise that some customers are looking for support during this difficult period and we have a range of measures to assist them including deferring repayments and reducing repayments to free up cash,” he said.