However, the scheme was able to help “accelerated buyers” enter the market four years early.

The federal government's First Home Loan Deposit Scheme (FHLDS) seemed to have missed buyers who “genuinely” need support to break into the market.

According to the Review of the National Housing Finance and Investment Corporation Act 2018 Report released by The Treasury, around 75% of FHLDS recipients would have been eligible to borrow for a property without the support of the scheme within 12 to 30 months of their purchase.

"This suggests that the majority of beneficiaries of the FHLDS are ‘accelerated buyers’ – those who would have been able to purchase a property, either with the support of LMI or with a full 20% deposit, in one to two years," the report said.

The findings are consistent with the view that the impact of the deposit scheme is mostly to bring forward demand that would have otherwise occurred in the short to medium term.

In fact, the report said if buyers under the FHLDS did not have alternative financial means and had to save the entire 20% deposit, they would have had to delay their first home purchase by an average of four years, five years in NSW.

In this regard, the report said evidence indicates that the scheme "appears to be achieving the objective."

However, the limited number of places for the scheme means that many prospective buyers who need help the most miss out on the benefits of the scheme.

"Other prospective buyers may not be able to afford LMI or secure finance without an FHLDS guarantee," the report said.

"For these prospective buyers, their purchase is delayed until they are able to secure an FHLDS place."

Still, the report noted that around 12% of FHLDS participants to date would have income levels lower than those that would be generally acceptable for non-scheme loans.

Strong take-up for the scheme

The report showed that during the first full year of the deposit scheme, demand levels were strong.

In fact, within four months of the scheme's commencement on 1 January 2020, over 8,000 guarantee places were given to settled purchases and first-home buyers with pre-approved finance.

The uptake in the following financial year was quicker, with around 9,600 of the 10,000 guarantee places settled or reserved within four months of being made available.

Impact on prices

The report was not able to determine whether the scheme has had any significant price impact, given its relative size in the context of the overall housing market.

"Economists who spoke with the Review noted that standard economic theory suggests that assistance to first-home buyers that simply brings forward or adds to demand without a corresponding increase in supply is likely to result in an increase in house prices which largely cancels out any positive benefit to first home buyers," the report said.

"Housing prices, however, may not adjust as rapidly as some other asset prices and so the earlier cohorts of first-home buyers that are supported by such schemes may be made better off, whereas those that purchase later on may not derive much benefit at all."

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Photo by Bruno Emmanuelle on Unplash.

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