Singles step into property market thanks to government scheme

Aussie first home buyers who may have felt priced out of the property market are now getting a foot on the ladder, thanks to the First Home Loan Deposit Scheme.

According to an ABC News article, the latest data released by the Government shows that 6,500 loans were being processed since the First Home Loan Deposit Scheme (FHLDS) officially began accepting applications on 1 January, this year.

If you’re worried you’ve missed your chance to apply, there are 3,500 places still left this financial year, and 10,000 available from July.

FHLDS uptake quick facts:

• Majority of buyers have been single applicants.
• More than half the applicants are under 30 (except in Sydney).
• Average income for singles is $67,126, average income for couples is $111,534.
• 70 per cent of applications have been for houses, 25 per cent for apartments and 5 per cent for townhouses.

Singled out of the property market

The applicant income cap was set at $125,000 for a single buyer or $200,000 for a couple.

Interestingly, the majority of buyers using the FHLDS have been single, and the average income of the single participants was also $67,126.

This may seem surprising for budding first home buyers in some major cities.

In Sydney the median house price is $862,814 (Corelogic), but the median income needed to avoid mortgage stress on a 30-year owner-occupier home loan, paying principal and interest, is $127,710.

This is much higher than the average single income of applicants so far, and it’s a similar story in Melbourne, Brisbane, Hobart and Canberra too.

Single first home buyers looking in these more expensive capital cities and hoping to apply for the FHLDS may want to consider looking at smaller apartments or suburbs where property prices are still within reach. This way they can try to avoid mortgage stress and stay under the applicant income cap.

• Mortgage stress: The commonly accepted financial definition of mortgage stress is spending 30% or more of your pre-tax income on home loan repayments.

Salary needed to afford a median house and avoid mortgage stress

Source: RateCity.com.au, Corelogic Home Value Index: January 2020.

Note: Monthly repayments based on 30-year loan term. Interest rate based on average owner-occupier, principal and interest rate on RateCity database for January 2020 (3.74%). Data accurate as of 17 February 2020.

No silver bullet solution for younger Australians

As per the above table, Sydney singles would have to have incomes higher than the cap to afford a median priced house and avoid mortgage stress, putting them in a tricky position.

In an ABC article released today, Housing Minister Michael Sukkar said that there is no “silver bullet” solution to help young people get into property market.

"There's no scheme, including this one, that is a silver bullet to the difficulties that particularly younger people face in our major capital cities, where their jobs are," said Mr Sukkar.

"One of the things the Prime Minister and I wanted to do was make sure this didn't just become a Sydney-, Melbourne-, Brisbane-centric scheme.

"And if we didn't pay such close attention to the way we designed it, it could easily have gone that way."

"Of course, if you're on a single income, you're… going to be more likely to be someone who fits within those price caps.

"If you've got a double income, perhaps your capacity is higher than a single, and my view is it probably pushes some people to looking at homes outside the house-price caps," said Mr Sukkar.

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