Sydney house prices soar, widening the deposit gap

For sole parent and social scientist Antoinette Pavithra, using the Family Home Guarantee through her bank, NAB, was the only way she could get her foot in the door of a fast-rising market last year.

“I wasn’t sure if I would be able to afford [a property] for a while to come if not for that grant,” Ms Pavithra said, adding that she had been saving for a deposit for some time but was always short.

Ms Pavithra said she would have been priced out if she had not bought her apartment last year.Credit:Oscar Coleman

After three months of searching for a unit, she bought in Waitara, which she put down to a stroke of luck.

“I don’t understand how anyone can buy in this market. I absolutely would not have been able to qualify [without the scheme],” said the 39-year-old researcher.

“Even with trying to save that 20 per cent and with prices appreciating the way they are, it’s like chasing a unicorn. Every time you think you’ve made the cut, the prices keep going up that much more. The competition is fierce too.

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“Then you add the intersectional factors, if you’re a person of color, or you’re an immigrant and don’t have that intergenerational wealth, or have a disability, it becomes even harder [to buy] with every social factor that you add.”

She said without the bank’s help in accessing the scheme she would have been priced out of the market. Ella’s units in her building are now selling for $100,000 more than what she paid six months ago.

UNSW’s City Futures Research Center research fellow Dr Chris Martin said while the scheme benefits individuals, on the whole it pushes property prices up for first-time home buyers down the track.

“I can understand the appeal of a scheme that gives them this extra amount of security they can offer the bank that enables them to borrow a bit more and to get in, to make that further extension of their purchasing power that will get them ahead at the auction and sales,” Dr Martin said.

“Having said that, that’s how it works. They set a new higher price … The benefits of these schemes means they get into home ownership quicker than they would, [but] the general effect is it increases prices.

Demand-side incentives can increase competition for property.

Demand-side incentives can increase competition for property.Credit:Peter Rae

“I don’t want to knock people in that situation who have been saving to buy. Renting is too awful, and it’s made that way. It shouldn’t be that way,” he said.

Governments should add more supply, including more affordable housing, rather than inflate the property market, he said.

“There will be someone else in a similar situation to [Ms Pavithra], a version of herself five years younger who isn’t as close and who won’t get the benefit of the scheme this time around. Other things being equal, prices will be going that much further.”

Mortgage Choice Penrith and Blaxland principal broker Rob Lees said many aspirational homeowners signed up for the scheme when it began in 2019, but has since become almost redundant due to the runaway price growth in even affordable areas like Penrith and lower Blue Mountains.

Even once-affordable neighborhoods are now out of reach of the first-home buyer scheme.

Even once-affordable neighborhoods are now out of reach of the first-home buyer scheme.Credit:Peter Rae

“There just aren’t many people buying from it … it’s an entry-level market, but it’s now at $950,000 to a $1 million. So, it’s priced out to a lot of people. We’re not even bothering about reserving spots.”

The Australia Institute’s senior economist, Matt Grudnoff, said there are two ways to make housing more affordable.

“You can decrease demand or increase supply. Giving more money to first-home buyers increases demand, meaning they can borrow more, they will show up to the auction with more money and the price goes higher,” he said.

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“It shuffles around who gets to buy a house but ultimately increases the price of housing.

“Making affordable housing means house prices go backwards. Politicians want to sound like they want to do something about housing affordability but they don’t actually want to do anything about it.”

Housing minister Michael Sukkar said that 60,000 Australians had already been supported into home ownership under the Home Guarantee Scheme.

“We want to help even more Australians into their first home or a home that they’ve built for their family, which is why we are expanding the scheme,” he said.

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