A month into the Australian Government's 5% Deposit Scheme, some homebuyers feel left behind. Peter Njoroge, a 46-year-old father of three, is one of them. He earns around $130,000 a year working in disability care, and his wife earns $40,000 a year from childcare work. Their combined pre-tax income is $170,000, which is comfortable, but they've struggled to save for a house deposit due to high living costs and rent. The federal government promised to help high-earning Australians like Njoroge buy homes through programs like its expanded 5% deposit scheme for first homebuyers. The scheme offers unlimited places, no income limits, and higher price caps for eligible properties. It also caters to single parents and buyers who haven't owned property in 10 years. However, Njoroge and his wife, who are both casual workers, have been unable to secure bank financing for the scheme. They are essential workers who need houses, but their employment status makes it difficult to get loans. Njoroge hopes the Help To Buy scheme, where the Commonwealth purchases up to 30% of a home or 40% of a new build, will offer better opportunities. This program has a limit of 10,000 places and is set to launch before the end of the year. As the 5% deposit scheme gains popularity, demand for loans is soaring. Real estate agents report longer wait times for pre-approval, and mortgage brokers note a 39% surge in first homebuyer loan applications in October. Home prices are rising faster, too, attributed to first homebuyer incentives, supply shortages, and previous interest rate cuts. However, growing inflation has dampened hopes of further rate cuts, and the RBA has kept rates on hold. Angus Moore, a senior economist, predicts strong consumer sentiment and rising first homebuyer activity and prices. Treasury modeling suggests a 0.5% price increase over six years, while other estimates forecast higher increases. The real winners of price increases are existing property owners, according to Chris Martin, a housing researcher. He argues that property insiders benefit from the increased purchasing power of other housing consumers, leading to higher housing wealth and the ability to buy more housing. Leith Golding, a 58-year-old father of two, shares a similar sentiment. He used to own a home but is now renting after a divorce. Despite earning a six-figure salary and being eligible for the 5% scheme, he finds it challenging to buy an appropriately sized property in his area. Golding believes that homebuyer schemes often benefit one cohort at the expense of others and lead to short-term thinking, pushing housing prices up further. He hopes the housing conversation includes issues like longer leases and better conditions for renters to alleviate the pressure on the home-buying market. He concludes that the race to ownership is unsustainable in the long term and requires a different approach.
