A SWAN Hill real estate agent believes the federal government offering incentives to first home buyers is making it difficult for investors to purchase properties.
First home-owners are now being offered lower deposit rates, 5 per cent down from 10 per cent, when purchasing a property.
The “retweaked” first home loan deposit scheme encourages low and middle income earners to purchase a property “sooner”.
The scheme is in addition to the first home owners grant for first home buyers.
Wood & Co Real Estate managing director Brian Wood said the scheme, and other incentives, provided potential advantages for first home buyers over investors.
“The government’s encouraging them, I think they’re doing that because they realise the rental market is so tight,” Mr Wood said.
Mr Wood said in the Swan Hill region, rentals run by Wood & Co were currently “extremely tight”.
“That’s why they’ve done this scheme, because they know how hard it is for tenants to try and find suitable properties,” he said.
“The problem we’ve got, with the government providing more incentives for first home owners, is that it means it’s harder for investors to buy.
“So if investors can’t buy, how can we get more rentals?”
Mr Wood said the scheme also meant first home owners were borrowing more money to purchase a property from the banks.
“The banks are still going to look at the purchaser’s capacity to be able to service the loan,” he said.
“It does relieve the need for mortgage insurance, it lessens the need for it, which is a saving.
“Because when you’ve got to get mortgage insurance, it’s an extra cost to the purchaser.”
He said sometimes the purchaser would have to pay a slightly higher interest rate on their loan when mortgage insurance was included.
Mr Wood said the reduction in deposit cost gave owners a smaller equity, meaning banks would have a higher loan-to-value-ratio.
“Anything that puts the banks at more risk, means the banks are going to be more cautious about lending,” he said.
One aspect of the scheme is the reduced deposit amount is capped at $375,000 for properties purchased in regional Victoria.
“The government’s theory on that is that if someone can afford to pay more than $375,000 in a regional area, they should have 10 per cent (saved up),” Mr Wood said.
“It’s a big assumption, but I guess they’ve got to draw the line in the sand somewhere.”
Meanwhile, Ray White Swan Hill principal Fiona Hawley said the capped amount was “fair and reasonable in a regional area such as Swan Hill”.
Ms Hawley said at this “early stage”, the deposit scheme hadn’t impacted the numbers of first home buyers active in the local market.
But, she said any extra assistance to help first home buyers, of all ages, was a positive for the local economy.
“It will definitely make it easier for low income people stuck in the rental cycle struggling to save a larger deposit because rents are increasing,” she said.
According to the Australian Government’s National Housing Finance and Investment Corporation (NHFIC), there are 10,000 spots available for first home buyers through the scheme.
Since January 1, banks have registered 3000 potential first home buyers under the scheme, with a further 7000 spots made available from February 1.
Potential applicants have 27 lenders to choose from.
NHFIC will also release 10,000 spots this financial year, and a further 10,000 from July 2020.
Real Estate Institute of Victoria (REIV) chief executive officer Gil King said the generous incentive helped new buyers enter the market at a faster pace.
“Which has been widely welcomed across the Victorian real estate sector,” he said.
“Only a few weeks into the new year and thousands of potential home buyers have already made applications, with the 3000 spots that were available in January being rapidly filled.”
Mr King said the federal government reported the median income for single buyers that had already applied for the scheme was $68,900.
