An expanded five per cent first home deposit scheme begins today, fulfilling a core government election pledge, but some observers are warning of the effect it will have on a frenzied housing market.
All first home buyers will be able to enter the property market with a five per cent deposit, with the rest of the deposit backed by the government under the Labor scheme.
The policy takes effect today after passing through parliament earlier this year.
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Under the changes, all first home buyers will have access, with no caps on places or income limits, according to government statements.
Property price caps will also be set higher in line with average house prices, providing access to a greater variety of homes.
The government expects first home buyers using the scheme in just its first year are expected to avoid around $1.5 billion in potential mortgage insurance costs.
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But the Real Estate Buyers Agents Association of Australia has warned of potential adverse effects on the market.
REBAA president Melinda Jennison said prices had jumped significantly in many locations in the past month as home buyers started to panic about the impact of the scheme on the wider market.
"Properties that were selling for $750,000 last month are now selling for close to $800,000," Jennison said.
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"Many buyers are reportedly panicking with some purchasing sight unseen or overpaying to secure a property before 1 October."
Jennison said it was admirable for the government to help more first home buyers enter the market, but without more housing supple, extra demand would only drive up the market.
"What was $800,000 will soon be $900,000, which will make it even more difficult for first timers to secure finance for a home – even with the scheme's five per cent deposit on offer," she said.
"Markets are already in frenzy, let alone what the next few months will bring once the scheme has started.
"Property buyers need to calm down, stick to their budgets, and seek out expert advice from professional buyers' agents to ensure they don't overpay because of their fear of missing out."
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