Research Briefing | Nov 24, 2022

First home guarantees to backstop bottom end of the market in Australia

Following the conclusion of HomeBuilder, rising property prices and interest rate hikes, first home buyer (FHB) demand has normalised to its pre-pandemic base. Preventing a steeper descent as housing affordability worsened, the Home Guarantee Scheme helped prop up demand which would have otherwise been lost or deferred. Over 19,800 FHBs took up a guarantee in FY2022, representing 15% of all owner-occupier FHB borrowers, up from 10% a year earlier.

What you will learn:

  • The number of placements has increased substantially in FY2023 to 50,000, with 35,000 of these from the First Home Guarantee, which saw virtually all available places taken up last year. The popularity of the Guarantee and the increase in the property price caps from 1 July 2022 signals that almost all new spots will be absorbed by the market.
  • We expect the Scheme to support FHB demand over the next 12 months, partially offsetting the drag on demand from squeezed borrowing capacity. Combined with the deterioration in rental affordability, FHB demand should stabilise. Facilitating turnover, the policy will help put a floor under property prices at the lower end of the market. We expect this to act as an important cushion preventing a steeper fall in property prices beyond our nationwide all-dwelling peak-to-trough forecast of -10.5% ending the second half of 2023.
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