What They Aren't Telling You About the First Home Guarantee

Prices are climbing, tempers are flaring, and a simple promise—“buy with just a 5% deposit”—isn’t as simple as it sounds. Joe and Michael unpack the new rules around Australia’s First Home Guarantee and why it might not be the slam dunk the federal government believes. 

We draw a clean line between the federal guarantee and state‑based grants and stamp duty concessions, then walk through what that means in New South Wales, Victoria, and Queensland. 

The boys don't just complain, Joe provides practical solutions that might improve supply and demand. 

Follow us for more property news and mortgage advice! 

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DISCLAIMER This podcast contains general financial information only. That means the information does not take into account your objectives, financial situation, or needs. Because of that, you should consider if the information is appropriate to you and your needs before acting on it.

Transcript

The “Property War” Explained

SPEAKER_02 0:00

We've got a perfect storm for the property prices in Australia to become overinflated. The first thing that has not been explained to people in the market is I am emotionally affected by this scheme. It's an actual perfect storm that's going to seriously handicap people. There's going to be some serious deflection and serious blame because we have a serious undersupply in the market.

SPEAKER_00 0:27

As much as it is a personal purchase, it's a business purchase. They are creating complicated messes that don't need to exist. This is stupid. Definitely do your research. This is not a small decision. You're not buying a handbag. How do we create a fix to this? Okay, here is how you create a fix.

Scheme Changes: No Caps, Bigger Groups

SPEAKER_01 0:46

Welcome to the finance show with Joe. He's Joe, I'm Michael, and today we're going to be talking about the property war that's going to emerge between investors and first-time buyers. And yes, it is a war, and I'll explain why. Joe, how are you going though?

SPEAKER_02 0:57

I'm I'm good, mate. I'm good. Um I'm uh agitated because look, guys, before we go onto any podcast, and I do have to preface uh this advice is general in nature. Please always contact your finance specialist or seek professional advice before committing to anything. Disclaimer done. Before I go, this is the reason why it's a fucking war. Okay, and I've started with cursing. You could see the visceral reaction, you could see how I am emotionally affected. We're calling it a property war uh because there's gonna be first home buyers and investors on either side. People need homes.

SPEAKER_01 1:34

Yep, people do need homes, it's true.

SPEAKER_02 1:37

The median age of a first home buyer in Australia has increased.

SPEAKER_01 1:42

Yeah, it's 36 now from memory. It used to be 34.

SPEAKER_02 1:45

And it's possibly even higher now. So that 36-year-old statistic was taken from last year. I'm putting the money on. I say it's 37, 38 now. Yeah, it's I I am putting money on that because it was 34 and then jumped up to 36. And what's it gonna be this year? Well, housing prices have only gone up. Yeah, interest rates are going down. So that means people who anyways, it's a fucking war.

SPEAKER_01 2:09

Yeah, okay. Just for some context for those who don't understand why it's a property war, in October, the uh 5% deposit scheme, or whatever they've decided to call it, um, is kicking in and it there's no there's no caps, there's no income caps, and there's no um, there's no places. You know how that you there was like a set amount of places, I should say it was like a hundred places for first-term buyers to be eligible. That's all gone now. So every first-term buyer is eligible for this.

SPEAKER_02 2:35

They it was a hundred thousand people, okay, could be placed into the scheme. Yeah, well, it started at 10,000, then it went to 30, then went up to 50. I think it went up to 100. Don't quote me on this. I don't like okay, if I get something wrong, go fuck yourselves, anyways.

SPEAKER_01 2:48

Uh leave it in the comments.

SPEAKER_02 2:50

Yeah, but if I got that wrong, I from what I remember, it was a hundred uh it could have been a hundred thousand.

SPEAKER_01 2:55

I think it was a hundred thousand.

SPEAKER_02 2:57

But that now they've gotten rid of that. They've scrapped that completely. Okay. The other changes that they've included is it's no longer a two-person purchasing property transaction.

SPEAKER_01 3:08

Yeah, any groups, big groups can buy it now.

SPEAKER_02 3:10

Four people can purchase. Okay, so they've removed that uh restriction as well, and they've removed the income restrictions around this. Yeah. Now, the reason I am extremely agitated by this scheme, and the reason I'm extremely upset is well, there's five key reasons. Okay. So we've brought up these changes, no income requirements, there's no um uh limit on individuals, um, there's no uh income caps, like there's just so many things that they've removed, and there's it's it's it's frustrating.

SPEAKER_01 3:43

Because but by the way, this sounds good on paper.

SPEAKER_02 3:46

It's it's fantastic on paper.

Stamp Duty vs The 5% Myth

SPEAKER_01 3:47

Yeah, like for first home buyers in a in a vacuum, this is fantastic.

SPEAKER_02 3:50

Okay, so the first thing that has not been explained to people in the market, yeah, is this is a federal scheme. It is not correlated with the first home buyer's grant or stamp duty concessions.

SPEAKER_01 4:06

And the just just again, just for clarity, the first home buyer's grant is that that's when they give you a deposit or give you a section of a deposit or something like that?

SPEAKER_02 4:14

So you used to purchase your first home, yeah. They used to give you a$10,000,$15,000 um additive to uh help you complete the transaction, but it was only up to a certain limit. So New South Wales, the first home owners grant still exists.

SPEAKER_01 4:29

Yeah.

SPEAKER_02 4:30

If you buy a block of land between$450,000 to$600,000. Good luck. That's it. The rest of the uh first home owners grant is rolled into stamp duty concessions now. Yes, yes. Now, what a stamp duty concession is, if you are a first home buyer and you are purchasing your first home and you intend to live in it, yeah, what the stamp duty concession would allow you to do is purchase for up to$800,000 and not have to pay any additional stamp duty.

SPEAKER_01 5:00

Which is up to like$20,000 or something like that.

SPEAKER_02 5:03

Up to so when you get up to that$800,000, you're sitting at about$28,000. Yeah, yeah. Okay, with or without. And then between$850 and a million, okay, you would receive a concession. You get a 50% discount, 40% discount, depending how high the property value was, would be how much you're paying for stamp duty. Once you hit that million dollar threshold, those stamp duty concessions don't exist. So if you use the first home guarantee, which is purchasing with a 5% deposit, okay, to purchase something for a million dollars, it's not just a 5% deposit, you need to pay$50,000 for your deposit, and then you've got to pay another$43,000 for your stamp duty. And that's just in New South Wales.

SPEAKER_01 5:47

Yeah, it's different, it varies state by state.

SPEAKER_02 5:49

Well, I've got these memorized because I've done three videos on this now. Yeah, okay. So, for example, with Victoria, the maximum you can use the first home guarantee for is$950,000. Your deposit's gonna be$47,500, but your stamp duty is$52,000. So you're not buying with a 5% deposit. If anything, your stamp duty is worth more.

SPEAKER_01 6:09

Yeah. If you decide to use the 5% deposit scheme, you are not eligible for stamp deposit.

SPEAKER_02 6:17

No, you can't no, you can't. You can get stamp duty concession, but up to the concession limit.

SPEAKER_01 6:22

Limit, okay, which is which is under a million.

SPEAKER_02 6:24

Uh it depends state by state.

SPEAKER_01 6:25

State by state. Let's say New South Wales is.

SPEAKER_02 6:27

New South Wales is a million dollars and under. Okay. So you could go up to a million dollars. Um, Queensland, for example, if you are purchasing a newly built property, it's up to a million dollars, no stamp duty. Okay. But if it's existing, you've got to pay stamp duty. Okay. And their concession goes up to 700 or 800,000. I can't remember that one particularly off by heart.

SPEAKER_01 6:48

Yeah.

State-by-State Traps and Limits

SPEAKER_02 6:48

But what I'm trying to say is with the first home guarantee, all I have seen is you can buy with just a 5% deposit. You can buy with just a 5%. Yeah. And I'm sitting there and I'm like, well, no. You have the leader of our country using TikTok and Instagram to enable our youth to go and get pre-approvals with just a 5% deposit. A lot of the times, if you're calling up CBA or you're calling up NAB, or you're calling up, you know, a large-scale brokerage and you're not dealing with, you know, uh people that have been in the industry for two, three years, right? Sometimes they might forget to ask the question Do you have money for stamp duty? They're trying to pump their numbers up. They're trying to get as high of sales or commissions as possible. So people do forget to ask this question because they're so excited. They're like, oh, we're gonna get so many more customers. Yeah. If stamp duty costs more than what the deposit is, yeah, like it does in Victoria or it does right now in New South Wales, then you're enabling the youth to go and purchase properties and then think to themselves, oh, it's just a 5% deposit. And then when it comes time to go to the formal approval process, guess what happens? It's not just a 5% deposit, it's a 5% deposit plus stamp duty. So you're gonna see a lot of people go into financial hardship just to be able to acquire a property.

SPEAKER_01 8:11

And it's more likely to happen too in Sydney, particularly, because they've increased the cap, the property price cap to 1.5 million, which obviously under over a million stamp duty concessions no longer apply.

SPEAKER_02 8:23

Correct. Yeah. So you're going to see a lot of people struggle.

SPEAKER_01 8:26

Yeah, and with the and with the median house price at 1.2 or 1.6 or whatever it was, it's pretty likely that you will reach that threshold.

Lender Oversights and Hardship Risks

SPEAKER_02 8:34

And we've got a perfect storm for the property prices in Australia to become overinflated. What do I mean by this? Well, when we have a migration of 40,000 people, a net migration of 40,000 people per month, okay, we are only approving and dwelling a hundred uh uh approving and building a hundred and seventy thousand new dwellings a year, two to one. Okay, that makes sense for new people coming in, but we need to be building 170,000 dwellings for the people coming in, and then 170,000 dwellings for the people that are already here. We are so undersupplied when it comes to property that the prices keep going up. All this 5% deposit scheme has done.