What first-home buyers should know about the Melbourne housing market

Attention Melbourne first home buyers, there are a few things you should know. Firstly, property prices are growing in the big city, with new reports saying they’re expected to soar in 2020.

Here’s what first-home buyers need to know about the current market in Melbourne, plus some incentives and schemes to help you get your foot in the door.

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Key information about the Melbourne market

Following a 2.3% gain in October (the largest month-on-month increase since 2009), analysts are now saying the Melbourne market will skyrocket in the new year.

While prices currently remain below their peak, a recent SQM Research report anticipated a 17% lift in the Melbourne market next year.

Other forecasts have also predicted strong growth for 2020, with NAB Bank expecting house and unit prices to rise 7.4%, as CoreLogic suggests property values could reach record-breaking levels as soon as January.

However, SQM analyst Louis Christopher has questioned the sustainability of Melbourne’s growth cycle, saying:

“if we are right about 2020, I doubt we’ll see those numbers again in 2021.”

Regardless of the long-term outcome, rising house prices tend to be great for the economy, but not-so-great for one particularly cohort: first home buyers.

Cracking a strong market has proved particularly difficult for those who find it difficult to rake together their first deposit.

With that in mind, it’s good to know which first-home buyer schemes can help you get a foot in the door.

First-home buyer incentives in Victoria

The First Homeowner’s Grant (FHOG) Victoria offers up to $10,000 as a cash incentive ($20,000 for regional Victoria). The criteria includes:

• The property you buy must be your first property
• The property must be under $750,000
• The property must be less than five years old
• The property must be new (i.e. never been bought/sold before)
• The property must be your principal place of residence, i.e. you must live in the home for a minimum of 12 months.
• You can’t have claimed a FHOG in any other state or territory
• You must be over 18
• You must be an Australian citizen or permanent resident
• If buying with a partner, your partner must also meet most of the above criteria (there are some exceptions, so it’s best to do an online assessment)

The other main incentive to note is the first-home buyer duty exemption or concession. For owner-occupied homes up to $600,000 in value, you are exempt from paying stamp duty altogether. For houses over this amount but under $750,000 you’re eligible for a duty concession, or discount.

Here are some other government incentives to look in to:

• First-home buyer reduction (if you purchased a property before July 1, 2017)
• Off-the-plan concession
• First-home duty concession or exemption for pensioners
• First-home duty concession for buyers with a family
• The principal place of residency concession
• Young farmer‘s first-home exemption or concession

Also remember, while you can do your own research it may be easier to talk to your broker about your options.

The new incentives

A new federal government scheme will support 10,000 first-home buyers nationwide, by guaranteeing them a mortgage even if they have a deposit of only 5%.

Known at the First Home Loan Deposit Scheme, it’s is slated to start in January 2020, and will be offered to applicants on a “first-in-first-served basis”.

The values of properties to be purchased under the scheme are capped differently in each state and territory. In Melbourne and the state’s large regional centres, the scheme covers properties up to the value of $600,000. For the rest of Victoria, the offer is capped at $375,000.

The incentive is offered to singles who earn up to $125,000 per annum, and couples who earn less than $200,000.

Like the first-home buyer incentives, it will apply only to owner-occupied homes with principal and interest loans.

According to Housing Minister Michael Sukkar, the government will only be partnering with two of the major banks and will set aside 50% of the guarantees to smaller lenders.

The government is yet to clarify details of the scheme but it’s best to check whether your lender is part of it.

Words by Rebecca Mitchell

Looking for your first home loan? Contact eChioice and we’ll help you find the right deal. Our brokers have access to 100s of home loan products, so we’ll be able to find you the right mortgage.