18 Melbourne suburbs outrun Albanese’s $950k first-home cap - realestate.com.au

Since the Albanese government expanded its 5 percent deposit scheme a year ago, nearly 20 suburbs in Melbourne have become unaffordable for first-home buyers. Recent data from REA Group indicates that typical home prices in these 18 suburbs have surpassed the scheme's $950,000 cap, which aims to assist first-time buyers in entering the housing market with a lower deposit and avoiding lender's mortgage insurance.

In October of the previous year, the government raised the price limit for the scheme by $150,000 in both Melbourne and Geelong. However, new median price statistics reveal that the housing market has continued to rise, pushing typical home prices out of reach once again.

For potential buyers looking at units as a more affordable option, Templestowe presents a stark reality, with the suburb's median unit price now at $981,500, which exceeds the scheme's cap by $31,500. Additionally, Camberwell has seen its typical unit price increase by $95,000 to $995,000, while Ashwood's median unit price surged $110,000 to reach $1.05 million.

Botanic Ridge has also crossed the million-dollar mark, with its median house price rising by $88,000 to hit $1 million. Wandin North has similarly reached seven figures after an increase of $112,500. The upward trend in prices extends beyond the eastern suburbs of Melbourne, with Cairnlea and West Footscray reporting median house prices of $992,000 and $990,000, respectively.

Furthermore, another 30 suburbs have median house or unit prices hovering between $900,000 and $950,000, including Reservoir and Ferntree Gully, where the median price aligns exactly with the scheme's limit. These figures illustrate a growing divide in the Melbourne housing market, where prices are rising even as the overall market experiences a downturn.

Julian Khursigara, founder of Search Party Property and an Alba partner, noted that many first-home buyers are either abandoning their searches in preferred suburbs or postponing their plans due to uncertainties around interest rates and employment. He emphasized that the challenge is not merely saving for a deposit; prospective buyers are increasingly faced with the prospect of relocating up to two hours away from their workplaces to find affordable housing amid rising fuel costs.

This situation has led some buyers to consider "rentvesting," a strategy where they continue renting in their desired areas while purchasing investment properties in more affordable locations. However, those opting for this approach do not qualify for the federal first-home buyer scheme.

Damian Medici, director of Margin Finance, commented that while the government has made it easier for first-home buyers to secure larger loans, it has not effectively tackled the underlying issue of housing affordability. "They haven’t made it more affordable," he stated. "They’ve made it easy to take on bigger mortgages, definitely." For buyers reaching the $950,000 limit with the minimum 5 percent deposit, they would still need a mortgage of $902,500, excluding other associated costs.

Mr. Medici cautioned that buyers taking on larger loans are particularly vulnerable to rising interest rates, with any further increases posing significant risks for those entering the market. He suggested that raising the scheme's price ceiling has likely contributed to price increases in certain areas, although the extent of this impact remains unclear.

Aidan Hooper, managing director of ABN Group Victoria, expressed that the scheme is genuinely benefiting first-home buyers, especially those open to purchasing newly constructed homes. He noted that his company offers house-and-land packages starting at around $450,000, significantly lower than Melbourne's scheme limit. Over the past year, prices for these packages have remained relatively stable.

However, Mr. Hooper highlighted that the main barrier is buyer confidence, as concerns about job security and the potential for higher mortgage repayments heavily influence purchasing decisions. Under the current scheme, eligible buyers can acquire a home with a deposit as low as 5 percent without incurring lender's mortgage insurance, provided that the property's purchase price and lender-assessed value remain within the government's established cap.