Can you buy a home with a 5% deposit? Here’s what our real estate agents say.
Big news this week: All first home buyers will be eligible to put down a 5% deposit on a property from 1 October – down from the standard 20% suggestion.
Banks usually require a 20% deposit up-front for a home purchase.
It’s said to be a “game changer” for aspiring homeowners. The scheme, which first rolled out in 2020, has income caps ($125,000 for individuals and $200,000 for couples) – but come October there will no longer be income tests.
In terms of Lender’s Mortgage Insurance, the government will essentially become the ‘guarantor’, meaning homeowners won’t have to pay for LMI. According to an ABC article, an extra 20,000 guarantees will be issued in the next year, with the goal to get more people in owned homes sooner.
Some experts believe it will push prices higher and increase demand when there isn’t necessarily the stock, making it even harder for first-time homeowners to break into the market.
There are price caps which differ state-to-state. In Adelaide, it’s increased from $600K to $900K. In other areas in South Australia (including ours), it’s increased from $450K to $500K. This is challenging, given the current median house price in Mount Barker sitting at $740,000.
Many people have been hard pressed to find a home in the Adelaide Hills under $500K, which would make the 5% deposit redundant.
So, what about the Adelaide Hills? Here’s what our Managing Director, Michael Nitschke, has to say.
“This initiative will bring home ownership forward for many aspiring homeowners in the Adelaide Hills. However, it won’t shift the tight supply levels we are seeing heading into spring,” Nitschke said.
“The result will lead to this coming spring being the strongest selling conditions we have seen, particularly after subsequent rate cuts. This is after a period of 4+ years now of record house price growth for our region. We are in some unprecedented times.”
Keep an eye on our monthly market updates (see August and July) for the most up to date commentary regarding our region. As Michael Nitschke said, the 5% deposit news doesn’t solve the supply issues in our growing region and as we reported last month, stock levels are down 23% vs. the same period last year.
For specific advice for planning a deposit based on your personal situation, it’s best to speak with a mortgage and finance broker. We have various partners we can recommend, when you’re ready.
As always, reach out to us with all your Adelaide Hills property questions.
Make sure you’re on our email list – we send insightful and informative weekly letters for Adelaide Hills locals. Ask us your property questions and we’ll get back to you.
