For many Australians trying to enter the property market, the promise of buying a home with just a 5% deposit sounds like a breakthrough.

Government-backed schemes designed to support first home buyers have made headlines, but how much do they actually help buyers in practice? And what happens when thousands of buyers suddenly gain access to the same opportunity?

In this episode, Veronica and Chris sit down with mortgage broker and National First Home Buyer Specialist Jack Elliott to unpack how first home buyer schemes actually work from the lending side. They explore the mechanics behind borrowing capacity, the role banks play in approving these loans, and the reality buyers face when trying to secure property in an increasingly competitive entry-level market.

The conversation also dives into the unintended consequences of these policies. While schemes like the First Home Guarantee can lower the barrier to entry, they can also increase competition in the very markets first home buyers are targeting. As more buyers gain access to financing, the question becomes whether these policies truly improve affordability—or simply shift the dynamics of demand.

If you're considering buying your first property or trying to understand how government incentives shape the market, this episode offers a grounded look at how these schemes operate in the real world—and what buyers need to know before stepping in.

Episode Highlights

00:34 — Meet Mortgage Broker Jack Elliott

04:41 — How the First Home Guarantee Scheme Works

06:36 — The Hidden Risks of 95% Home Loans

12:48 — Buyer Rush and Rising Market Competition

17:19 — Eligibility Rules First Buyers Must Understand

19:39 — Planning for Long-Term Home Ownership

24:51 — Price Caps and the Resale Ceiling Problem

27:11 — How Bigger Deposits Change Buyer Strategy

28:22 — When First Home Buyers Should Use a Buyers Agent

32:05 — Why First Home Buyers Struggle to Enter the Market

35:30 — Why Patience Matters in a Hot Property Market

37:24 — Why Property Can Be Easier to Sell Than Buy

42:49 — Who Should Consider Shared Equity Schemes

47:09 — New Loan Products Buyers Should Watch

49:05 — Policy Risks Around New Build Incentives

54:06 — The Danger of Buying Property in a Rush

55:13 — Final Advice for First Home Buyers

About the Guest

Jack Elliott is a mortgage broker and National First Home Buyer Specialist who works directly with Australian home buyers navigating the lending process. Through his work, Jack helps clients understand their borrowing capacity, structure loan applications, and secure financing across a range of lenders.

With day-to-day exposure to how banks assess risk, deposits, and borrower profiles, Jack brings a practical perspective on how lending policies and government incentives influence the property market. His experience working with first home buyers provides valuable insight into the challenges many Australians face when trying to secure their first home.

Connect with Jack

• Jack’s LinkedIn
• Alcove Mortgage Advisory
• First Home Unlocked
• First Home Unlocked | Podcast on Spotify
• First Home Unlocked - Podcast
• First Home Unlocked - YouTube
• First Home Unlocked (@firsthomeunlocked) • Instagram photos and videos
• First Home Unlocked
• First Home Unlocked’s TikTok
• First Home Unlocked’s LinkedIn

Resources

• Visit our website: https://www.theelephantintheroom.com.au
• If you have any questions or would like to be featured on our show, contact us at:
• The Elephant in the Room Property Podcast - questions@theelephantintheroom.com.au
• Looking for a Sydney Buyers Agent? https://www.gooddeeds.com.au
• Work with Veronica: https://www.veronicamorgan.com.au
• Looking for a Mortgage Broker? alcove.com.au
• Work with Chris: chrisbates@alcove.com.au

Enjoyed the podcast? Don't miss out on what's yet to come! Hit that subscription button, spread the word, and join us for more insightful discussions in real estate. Your journey starts now!

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If you enjoyed today’s podcast, don’t forget to subscribe, rate, and share the show! There’s more to come, so we hope to have you along with us on this journey!

See you on the inside,

Veronica & Chris

TEITR 431 Jack

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For many aspiring owners, a real barrier isn't just saving a deposit, it's understanding how banks assess risk. How borrowing capacity is actually determined and how one small misstep can derail an application if the lending system feels opaque. Is that by design or just a byproduct of how it's evolved to take us on a tour of the options available for first home buyers today we're joined by Jack Elliot Mortgage Broker and National First Home buyer specialist at Alcove and co-host of the First Home Unlocked podcast.

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Welcome, Jack. It's good to see you.

Jack: Thanks, Veronica. Thanks for having me on and thanks Chris.

CB: we work together, so we've done four oh oh episodes. We very rarely get people from our own teams on,~ um,~ so you should feel very privileged, but also we don't really like to pump up our own businesses on here, and so today's not about that, right? Today's us having a real conversation around first home buyers, the challenges they're facing, not just from a lending point of view, but actually going out and buying and, what we're seeing.

And I guess give, uh,~ uh,~ people a bit more understanding of the. The pros and cons and, and there's situations because I do think there's a lot of misunderstanding about every first home buyout, there's using 5% deposit schemes and that's what's driving the market when on the reality it's not. So let's just talk about the clients you, you're working with and, you know, we've got clients all over the country, but you know, what are some of the major challenges they're facing?

Yes, they can get access to lending and better than they ever have, but what are some of the challenges they're really facing day to day?

Like you've mentioned, there's so many schemes and different options to use it. It can feel really, really overwhelming. Now, underneath. That. Then there's usually the fear of making the wrong decision. So it's a really big financial decision when buying your first home, and that's where they don't want to get it wrong.

There's kind of that hesitation to do the wrong thing. Now, like we've mentioned, the good news is there are more pathways available to you as a first home buyer right now than ever before, but then it's about. Stepping back. ~Um, ~and my role is to kind of guide them through that feeling clear, calm, and confident throughout the whole process, and show what them options actually are, and then more importantly, what options actually suit your situation and what you want in the future as well.

VM: One of the other hats that I wear, and the other podcast that I'm actually on as well is called Your First Home Buyer Guide. ~Um, ~I don't talk about too much on here, but ~um, ~we certainly are fans. In fact, step one of our, we teach people how to buy a property, right? ~Um, ~and step one is getting your support crew.

That includes a mortgage broker and we are, we are definitely advocates of using a broker, but not all brokers are equal. Right. ~Um, ~and we are also advocates of getting people to talk to a broker before they think they're ready for one. Because I think what and where we're gonna get to here, I'm guessing,~ um,~ is that quite often people are actually ready to buy sooner than they might think they're ready to buy.

Particularly with a lot of these government incentives. So can we talk through. Some of those pro, maybe the most pressing one is the most recently. ~Um, uh, ~new and improved version, if you like, which is the first home guarantee. Can we start with that? Which I think might be the most widely used option. Is that fair?

And can you explain how that first home guarantee 5% deposit scheme actually works?

But like you said, the first home, 5% deposit scheme, so that 5% deposit scheme is the most widely used option for first home buyers Now what it is, it's a federal government initiative run by Housing Australia, which allows eligible first home buyers to purchase a property with just 5% deposit, avoiding paying lenders mortgage insurance.

You get access to competitive interest rates, and you own a hundred percent of the home So it's really helping you get into the market sooner without having to spend years saving that bigger deposit and without that extra cost of lenders mortgage insurance as well. And like you mentioned, it is the most commonly used scheme,~ um,~ that we see with first home buyers.

It doesn't mean it's the only option, but it is the one that's the most common to use,~ um,~ as a first home.

VM: You still gotta pay it back though, don't you? And then you've got a bigger, more. Each.

Jack: Yeah, that's exactly right. So you are borrowing the risk is there is a bit of risk with it just with borrowing that higher,~ um,~ loan amount. So, like I said, you can buy with a minimum 5% deposit, which means you've got a, a loan devalue ratio of that 95%. And that is really important. We're setting, we're having conversation with.

CB: Jack, I do like how you explain that, ~which is, which is good. Um, Um, this is not a test, by the way, when you're, uh, uh, working in the business. Not like I'm watching every word you say. So, you know, definitely feel relaxed, mate, because It's a big shift though. Like~ a lot of people, you know, even when you were a first time buyer, now you got a house.

Like unless you're really understanding what the option was before the scheme and what the options are after the scheme and know how big of a shift it is, you sort of don't really understand. I think a lot of people in the market obviously aren't first time buyers or they haven't got kids going through a process and even then they don't even know what they're doing.

And that means that a lot more people can actually enter the market that maybe wouldn't have been able to before.

Jack: Yeah, so usually what happened before the scheme is that you would be aiming for that 10 to 12% deposit to save, so you'd get it under that 90% loan devalue ratio You would. Have the cost of lender's mortgage insurance that's added on. ~Um, ~now that would be depending on the lender that you choose in your purchase price,~ um,~ and your deposit size as well. But what that means is putting it into context. So you would have to say, let's say you saved a 10% deposit on a $700,000 property. You've got $70,000 saved as your deposit. Now if you use the first home guarantee scheme on that same property, you're only saving, half of that. So that's where that real amount comes in.

Now, if you think about that, to save that amount of money over the years, especially,~ um,~ with the day-to-day spending and living and, and situation at the moment, it would take a lot of years for you to get into the market and then you start to think about the opportunity costs of yes. I could potentially get it into the market sooner if I had to wait to save that deposit.

While there's that opportunity, cost of prices potentially rising in the areas or the, or the kind of property that you're looking at as well.

CB: So you kind make a good point. So let's say, and a lot of first time buyers are at 700,000. At, you know, but some are often a lot higher than that, which sometimes people are crazy. But when you've got a, you know, a couple of incomes maybe they've traveled, they've worked on their careers, they haven't ever bought,~ um,~ and they haven't really focused on savings, right?

for example, you know, 'cause they've been renting in these areas as well, and we would say, well your deposit you need is really 120, 130,~ um,~ plus stamp duties. So you need like, you know, close to 200 grand. They're like, I can't get anywhere near that. ~Um, ~but I've got 80. ~Um, ~and then often now they're looking at it and going, well.

I, I, yeah, I'll pay stamp duty, but I only need a 5% deposit. Well, 10% on 1.2 is like 120, you know, so it's sort of, they're, they're getting much closer than what they were before. And, and even a, a lender's mortgage insurance on a 1.2 purchase would've been, you know, two to sort of two point half percent probably.

So they saved 20 grand of lenders mortgage shoes on top of that as well. ~Um, ~because they wanted to spend a lot of money, they, you know, they needed a huge deposit. Whereas now it's much, much smaller and.

VM: So now it's like forced savings. So they get the opportunity to get into the market with a small deposit, but they've got the ability to service a larger loan. So then it just forces them to stop spending.

I'm paying a lot of money in rent as well. I mean, Jack, can you mind just explaining how the change in October also worked, because I think it's important to explain that change as well and why it's also been varied, advantageous for first time buyers.

Jack: And just before I talk about then changes, definitely. Chris, I just wanted to mention as well, when we're talking deposits as well. Yes. With the 5% deposit scheme you can buy with a minimum loan deposit of 5%, then you've gotta factor in all the other upfront costs, like you mentioned in your stamp duty, your.

Legal costs and things of that. So if you're looking at a property price, it's not just I need to fight save 5% and I'm ready to buy. There's all them other extra costs,~ um,~ that are on top of that as well. So that's where coming and talking with a broker early, you can sit down, work out what them other costs are involved and get the kind of,~ um,~ targeted savings amount as well.

So in most major cities and regional areas, they have increased, and then the place limits were removed. So previously there was a limit on how many basis could be used each financial year, and now there's unlimited spots. So. Kind of before October, them higher income earners were locked out entirely, and the price caps in some cities were pushing buyers towards cheaper properties and weren't really in line with the market.

~Um, ~at that time. Now, these changes have opened up a lot more access and made the scheme a lot more attractive for first home buyers as well, with the changes that happened in October.

VM: So did you get bowled over in the rush?

So, yes. We did find a lot of first time buyers coming, even first time buyers that we'd spoken to who were waiting to save more, or were looking at different options, were then like, okay, well these property price changes,~ um,~ we might be able to buy the quality asset that we're looking at for that price that we're looking at. ~Um, ~Um, so we were doing a lot of numbers, a lot of reworks on what does the changes, what do they look like, and then waiting for that October 1st date to roll around to kind of get them,~ um,~ get them first home buyers pre-approved and in a position,~ um,~ ready to purchase as well.

Jack: It was, and like you said, there was two kind of camps that first home buyers found themselves in. It was the ones who were trying to get a property before potentially the. Was more demand that come into the market with the first home buyers that were locked out with them. Current kind of scheme rules with the income caps and things like that that I mentioned.

So there was that kind of urgency for people to try and buy before the rush. ~Um, ~and that's what they were expecting. Rush more demand prices increasing in the areas that were looking in. And then we had the other first home buyers who were like, oh, well I wanna get everything organized, so. I'm in the market as soon as I possibly can be with that pre-approval organized as soon as I can after that 1st of October.

So it was interesting to kind of have them different kinds of conversations as well, because in this kind of first home buyer space, we really talk about slowing down and making really good decisions and not trying to rush towards schemes or using schemes or if there's a potential deadline like this, not just trying to buy something to tick that.

CB: I think E, is it fair Jack though that, you know, even in July, August, the awareness that the 5% deposit scheme changes that were gonna happen in January. Was really quite low. Like it wasn't in the media and we spoke about it on the pod and it was, but it wasn't that. And then all of a sudden the government sort of, Hey, this is coming and instead of January, it's going to October.

And then it exploded, not just from, you know, first time buyers hearing about it on the news and in the papers and things like that, Which is one of the challenges we're gonna talk about, further on. But also our clients and investors started coming to us and saying, well, that's gonna push up the market.

Jack: That's exactly right Chris. Like there's so many people that were looking at these kind of scheme changes and like you said, it was very much not marketed. There wasn't much said about, it was like January 1st, that's when it's gonna happen. And that was kinda left as Suzanne, they announced it was happening in October.

Obviously we've talked about in Two First Home Bio, but like you said, we had investors coming in and then what we've found is first home wise and investors are. Everyone repeating with the same properties and the investors were seeing that as an opportunity, even down to the real estate agent, seeing it as an opportunity.

Okay, well the schemes are going to increase to this amount in my area. I'm gonna start kind of getting in more touch with that. Um.~ Um. ~Yeah, adjusting my prices to that and what we've seen was a lot of competition that happened from the very beginning and, and like we've already said, it was leading up to October, but then especially when that October 1st date kind of come around and we were hearing it from clients all over.

There was, there was that demand factor where if you had a finance clause or you had these kind of extra conditions, it was just like, we're not even gonna look at your offer, no matter the price kind of thing.

VM: So who's actually eligible or who's not? Just who's not eligible. I think it sounds like everybody's eligible almost.

Jack: Yeah, pretty much Veronica. So look, the eligibility name points that you need to kind of tick off as you're Australian citizen or permanent resident. ~Um, ~Um, you are a first home buyer or you've not owned a property in the last 10 years. So it also does help people get back into the property market if they've been locked out for that time. ~Um, ~you must move in within six months of settlement. Now that's. Gonna be the case on established properties, but that's kind of more for new builds. ~Um, ~your deposit must be genuinely safe. So you must, hold that in your account for at least three months to tick that box and then that property must fall under the relevant price caps for the area.

Like we said, higher loan amounts can be at them, higher mortgage repayments, so that definitely does help out a bit

as well.

So often they get that wrong, but. With this. So basically whatever you have less than 80% equity, you need to be in that property, or you need to then make up whatever the LMI LMI is or the lender's mortgage insurance on the difference between 80% and whatever equity you have if you want to move out and make an investment property.

Is that, have I read that right?

Jack: Yeah, that's right Veronica. So yeah, this is a. Important consideration. 'cause you're right, a lot of people don't think about it. They just attach it to like the stamp duty and the grant. I've gotta live in it for 12 months and then I'll be able to do this. And we've had conversations with first home buyers who have come in with that mindset.

With that mind frame of the next five to 10 years, you want to be living in it. You want it to suit of lifestyle changes, because that's also another thing that first home buyers are going through at that time of life. There's a lot of changes, family planning, career changes. There could be lifestyle shifts as well. yes, the scheme helps you get to the market, but it's also about how to use that as a tool for that longevity as well, and kind of extending that runway of your first property. Now, when I say runway, that means that you're able to live in that property for as long as possible before you need to upgrade.

So you're not getting two years down the track and then having to upgrade and sell because it is very expensive to buy and sell. And because you're using a scheme like this, you're starting with that high loan to value ratio, so you don't have much equity to use for that next property. So it's just important considerations to understand.

That is one of the most important ones. You have to live in it while you're using this scheme.

VM: I would imagine even if you do get a bit of equity, say you get, you know, I don't know, 79% equity or something like that, or 80, 81% equity, then. When you go to upgrade, you're gonna probably have to take out lenders mortgage insurance for your next property, right

Because it's obviously a combination, right? Of paying down your loan, which is the slower kind of way, versus the property increasing in value. So what does that look like? How would it look to get off the scheme as a, as a first point of view? And that's usually around the average from their report in the last one or two year was about 20, 29 months was the average for using the scheme. And then from there, that's when you can start talking about them, different options of how to upgrade, how to structure the next property, if that's where you're up to on your timeline as well.

And Jack could explain it all, but it would take us a while. But go around, obviously they're paying stamp duty concessions.

VM: But you also, you don't have to sell in order to buy. So when you buy the first property, you've got no selling costs.

CB: Well, you still have to pay your agents.

VM: No, you don't know when you buy.

CB: Oh no, when you, when you're first, when you're buying, when you sell that property, you will,

VM: Yeah. When you upgrade, there's an additional cost you haven't even thought about.

CB: yeah. Yeah, that's right. So like the, when you're buying that, you haven't paid the, uh,~ uh,~ stamp duty, which is a huge saving, like 5%. It's, you know, you're not making any money till it grows 5%.

So if it doesn't go up in value, like you're underwater, like 5% of that property value straight away in stamp duty. And then you've got lenders mortgage insurance, which is usually probably two to 3% on top of that. So your cost to purchase was probably about eight. Then, you know, other sunk costs and stuff like that.

You'd be really careful and then you've, you know, you're buying into a market where there's a lot of momentum because this scheme exists. So that also de-risks you unless they pull the scheme.

VM: Well, it de-risks you unless you're buying at the very top.

Because if you're buying at the very top, then you're probably paying an over inflated price. Then you've got this hard ceiling, and then it's gonna take a long time before that sort of, that that property breaks that ceiling in terms of value.

CB: you know, which is 1.5 in Sydney ish, you know, 1 million in Melbourne, Brisbane. It can keep going down, but you're right, like if you are buying your demand. Is is sort of decreased after that sort of cap limit. ~Um, ~what do you reckon, Jack? I mean, we are only like a fraction, right?

Jack: Yeah. And look, that's, that's, that's on par with what the report said from last year. About a third of our clients probably used the scheme. And then that's what the report from last year, one and three first home buyers were using the, so you've got. Two thirds of first home buyers who aren't using this scheme as well.

Yes, it's marketed well. ~Um, ~it is a common pathway that we do see, especially at that kind of,~ um,~ entry level price. And like you were saying, Veronica and Chris get our cap on them. Price, price limits as well, so. Sometimes you've gotta be careful with them. 'cause in the areas that you're looking,~ um,~ um, you're already starting your first offer kind of at them.

You just need to be careful though, 'cause the guarantor does take on the risk,~ um,~ with doing that. So if you, as the buyer can't pay back your loan, the guarantor is then,~ um,~ They're putting your place to pay that back. So it, it really is important the guarantor needs to seek that legal advice. There is a few kind of,~ um,~ different steps that you need to take and like we've kind of talked about before, Chris as well, if you are the first of your family going through that and a guarantor is your option, it also is a good. Conversation to have with the family because you've got siblings that are following you as well, right? You don't just want to go in guns blazing. Yep. We're just gonna do a guarantor. We have to think about how it's going to affect, and not only you, but then the future kind of situations as well, not only for your parents, but then your siblings and stuff as well.

CB: not doing many of those. Jack, though, in fairness, we've probably, they've really dropped off with this scheme. ~Um, ~and so it's not like the other two thirds is going guarantor, you know? ~Um, ~a lot of people are using 90% Nu I as well because they're working in accounting or medi or lawyers,~ um,~ and that that allows them to, you know, not have to worry about the scheme as well.

But a lot of them. Which I won't take it outta your, your mouth here, Jack, but it's in, it's in like early inheritance, right? Like the intergenerational wealth is really high. ~Um, ~what do you think about that joke?

Jack: Yeah, definitely. I think pretty much on par kind of you've got the first home guarantee scheme of one third, and then if you were to kind of break that down the next, The more common scenario thing is that early inheritance, like it's having conversations with first home buyers and they've got 300, 400, $500,000 in a deposit from that early inheritance straight away.

Who's gonna wanna buy this property off me one day? How's that going to increase the demand when I do want to sell one day? ~Um, ~it's so important to kind of get you into the first home. Then also set them future steps up as well.

Veronica: I'm on a personal mission to help more people make better property decisions. You know, most people don't realize that they can cost themselves hundreds of thousands of dollars over the medium to long term when they make property decisions without all of the information that they need. And what I do is help people with tricky real estate problems, which offer masqueraders simple questions like, should I sell my investment property because the interest re payments are hurting, or should I buy before I sell?

Or ask me for introduction to the small group of buyer agents that I would personally recommend across the country. That's Veronica Morgan dot com au.

If you're considering a property move, which is buying your first time, upgrading, renovating, or investing, the team here at Alcove would love to help you think through your decision and get the finance right.

Please go to cove.com au to reach out.

VM: I think I would just add a caution there,~ um,~ because not all buyer agents will actually help you to get safely on the property ladder, and I think you have to be very, very careful. I've actually got a free, ~um. ~Questionnaire things to ask Buyer's agent. You don't even have to gimme an email address. You go to veronica morgan.com au and you can download that.

A lot of first home buyers can't afford a buyer's agent. But I think the worst thing, you know, we've had people do our course, they know more than some of these buyer's agents after they've done our course, you know? So I think the worst thing really is when somebody goes and pays somebody to help them, and that person actually stitches them up.

All good, all in good faith, often completely unwittingly, but sadly, our barrer entry to get into the, the market is so low that there's people out there that just really have no idea what they're doing. So be very, very careful if you're gonna go and use a buyer's agent. ~Um, ~certainly a good one. An experienced local professional,~ uh,~ can really give you an advantage, but I just, I, I have to step in and caution people on that one.

Jack: Of course, Veronica. And look, I, I just wanna mention as well, like I've been so lucky to be able to work with buyer agents like yourself and other top buyer agents in Australia, who are them local experts. Go and use a buyer's agent. I meaning kind of that experienced professional, not just any buyer's agent who's registered.

CB: ~um, ~you know, we, we've been sort of going, so Jack and I worked together on our first time buyers. We, we sort of go through and Jack will make sure we get the loans right and we structure it right and. The loan gets approved and you know, that's, it's all great and make sure the strategy's sound and they've considered all their options and they, and we get to the point where they're trying to buy property.

And this is, this isn't all like, you know, guns N Roses, I, that's the right saying, but this isn't all, ~uh, ~like great, this is first time buyers are loving this right now. First time buyers are struggling. Like this is tough. Like I just had a client that called today. I've been doing quite a few with Jack and.

So the bottom market's been going up to all the stuff that first home buyers want or can't afford because of their borrowing capacity that's been going up while the rest of the market, particularly the housing market in Sydney and Melbourne, has sort of been,~ um,~ plateauing, right. ~Um, ~and Brisbane, you know, Perth, Adelaide, the whole market's been going up.

So that's a different story, but,~ um,~ it's really hard.

VM: But it is actually worse in those three cities because it, it's already competitive. And then you've got, you've got this sort of on steroids for first home buyers and a lot of investors. Maybe not so much Brisbane these days. Maybe not even Adelaide, but certainly in Perth still it's seen as affordable.

They can jump in, they can show us their links of properties. They're looking at buying, you know, we prep them for auction or making offers and that sort of stuff. And, and the, you know, we get to see in some markets how difficult it is for them to get over the line. And these, these. People have got all the advantages because, you know, we're coaching them through this and they know the order to do things.

And that certainly took off. Again, in that lower, lower price point. I think the cap in Melbourne's 900, isn't it? ~Um, ~and so yeah, it's, it's, it is not easy. It's just, you know, getting the money sorted is just the beginning of the challenge, isn't it?

But that's in a quarter. ~Um, ~and you know, a lot of other cities are even higher than that. So like it's had more than a 1% impact in a quarter and we're only just getting started with the change to the scheme is and, ~and is that sort of just, I guess,~ what your role is, I guess, Jack and what you are saying as well with all your clients is that.

We're having to, you know, we know that, and pre-approvals aren't just all of a sudden buying. It's, it's a real patience and persistent game right now. And not just going and rushing and buying anything. 'cause you can still buy pretty average properties like that's possible. But if you are trying to overlay and buy good property, it's, it's actually really hard because there's very little wands that are staying on the market very long.

They're not accepting offers for 900, 850,000. So there's that patience with empowering the first home buyers to kind of know what want, but then there's that real patience that we're encouraging, especially in this time because you've just added so much demand. Demand. Demand to increasing these kind of scheme.

That's what we're trying to avoid. But yes, it is very difficult. We're hearing a lot about how there's a lot of more people at open Homes. Feels like that first home buyers potentially can start feeling locked out, but again, it's about coming back to their goals, their vision, and what they want to achieve out of this purchase, and being really patient with that at the moment currently.~ ~

VM: ~um,~ one of the, one of the tenets that we have at Home by Academy is,~ um,~ if it's easy to buy. It's probably gonna be hard to sell, and if it's hard to buy. It can often be easier to sell, and that is because we're talking about demand here. When you've got lots of demand for a property, it's really difficult to buy a property.

~Um, ~but it is easy to sell. Now, the problem with that, when you're in an inflated market at a certain price point, is that everything becomes hard to buy, and so then the skill becomes, how do I discern the type of property in a slower, normal market would be hard to buy versus the stuff that's easy to buy.

And I guess that's, that's sort of what you're talking about there as well. It's not so much just about, oh, not compromising on things that you wouldn't compromise on before. It's about making sure that you also buy a good asset. 'cause this has a job to do. It has a job to be your home for, you know, as long as it can possibly be.

But also, like you said earlier, most people's first home is not their forever home, so therefore it's, they're gonna have to upgrade at some point. ~Um, ~but there is is a new scheme coming in, right, which is called the help to buy Now. This is really different, completely different. ~Um, ~do you wanna take us through this one?

Let's say you've got $30,000 sitting in your offset account. Is your lender gonna say, you need to pay that back by this date? We'll wait and see. ~Um, ~any renovations you do that over are over $20,000. You need to require formal approval and valuations to be done, which you have to pay for to keep that growth.

Now, if you do a renovation in that property under this scheme that's over 2K, and you don't let them know, they will share in the growth of their improvements if you let them know. They, you get to keep the growth that you're adding, but if you don't let them know, they will cash in. Now, when you do refinance sale or you're adding or moving your co borrower, that all also anything to do with the house.

So that's that 15,000 that they would have in growth. So their total payout when, when it comes to sell is now 225,000, not the original. Kind of amount of that 210,000. Now, that's the kind of key thing. Yes. If you buy a really good quality asset and it's growing in value for you, so is the government's contribution, and then also your payout figure.

So it's very important to consider this when you're looking at shared ownership and shared equity schemes like this one.

VM: Have you any done any thoughts on sort of the best case and or use cases for this?

And it. The scheme is realistically that only way they can buy that really good quality asset or have a have, have access to it now for most first home buyers I would say, and even with these people that I'm helping at the moment with it, is look at every other option you have. First on the first home guarantee scheme, the Ali I waivers, we've talked about even a guarantor arrangement because. All of those allow you to keep that full ownership of the property and then also the growth of that property as well. Now that full ownership, it gives you that flexibility with them future moves as well. And this is where share equity can make sense for people in that situation. But it's a lot more complicated and it's worth reaching out, having an in-depth chat about what are the pros, what are the cons, what's that future timeline look like as well, because.

VM: you know, some, some buyers, for example, who can't afford a home large enough for what they need. So they've already got kids and they can only afford an apartment, a two bedroom apartment in the area that they wanna live in. And if a shared equity scheme gave them the opportunity to buy a home that was large enough for them all, and they could stay in for good 10, 15 years, and their incomes weren't necessarily gonna.

Suddenly skyrocket. I would imagine that'd be a really good,~ um,~ scenario that might. Fit well here. Instead of them rent vesting, they could still actually have a home that they could live in. And at least the gain is proportionate. It's the same percentage as what they're taking,~ uh,~ as opposed to some of these pri 'cause there's a bunch of private,~ um,~ options out there, which take a disproportionate.

So I think if you're talking to a broker about this, you've gotta talk to a broker who, there's only one bank, right? Does that mean you have to go direct to the

Jack: Yeah. So what it is, you've got bank Australian Commonwealth at the moment. You have to go direct to Commonwealth and Bank Australia. You can use your broker. So it really limits your options if you're using a broker to one, one option, which is a scary thing, right? Because. You are using a scheme, but you've gotta consider you're only looking, you're only getting access to potentially two lenders out of the 50 that we have on our panel.

CB: I mean, a lot of first time buyers aren't really first time buyers. Sometimes as well, they feel like they're a first time buyer, but they kind of feel like they are because they had a relationship. They bought somewhere, they broke, the relationship, broke down, and or you know, they're a single parent or, you know what I mean?

And they've had something or. Maybe they bought a cheap investment property somewhere that didn't really work and they're really a first home buyer, but they had a property before. Like there's a lot of people that, and then they're not eligible for the scheme 5% deposit scheme. ~Um, ~and so then it can work for them, I think.

Yeah, equity schemes, we are very nervous with them just because of all the unknown of how it's gonna play out, you know, election cycles. Do the banks change their policy? What does it mean? Like, can you get caught out and so, but. I do think that, you know, if we come back in five years time, it's gonna be a huge part of the market.

There's all these like low deposit home loans, which you kind of touched on as well, Veronica. ~Um, ~like people who are often from a tech background who,~ um,~ you know, are, are great at building products and tech who have then gone out to the property market and have seen that as an inefficiency here and how hard it is for first time buyers and they've sprung up this idea to, to help first home buyer with some cool brand and some cool marketing and behind the, you know, to play on that gap between what.

High income people can, you know, higher income, first time buyers in the deposit hurdle and but to make that work, they've either gotta have a really high cost of funding, they're not getting any scale. There's usually either a, a higher rate or they're potentially taking equity in the property. And so, but I do think you're gonna see lots of these type of products come in as well.

Jack, don't you agree?

Jack: definitely Chris. And it, it's like every option. Yes, there's all these pathways available. There's, there's so many options out there for first home buyers, and we could keep talking for hours about all the different pathways and what goes on and, and what you've got available, but it's really coming down to, okay, what? Is the information here on this certain pathway, how is it going to get me to where I want to be and what actually makes. Makes sense for my situation. You've gotta factor in all the different kind of things that were spoken about in this episode, just to get really clear on, okay, if I'm going to use this certain scheme, this is what I know I'm up for.

VM: I tell you what's interesting though, as a taxpayer and because this is an elephant in the room and I like to talk about, The other side of these things, you've got a government that is now well and state government. Some state governments. So Victoria's been, had a shared equity scheme for quite some time.

~Um, ~but now you got a federal government is prepared to go into co-ownership on properties and they're giving you a higher proportion if it's brand new and yet. Obviously whoever's done their numbers has failed because they're gonna co-invest and they're co-investing to a higher degree on the property type that has the highest proportion of loss making sales.

And a lot of the first home buyer, state-based grants, the stamp duty,~ uh,~ and other incentives are skewed towards encouraging people to buy brand new as well. We haven't sort of talked about those,~ um,~ state-based policies such as stamp duty, concessions, et cetera, too much here. ~Um, ~but I think that that's something that first time buyers need to be aware of and there probably will be as is.

Push for supply continues. ~Um, ~more incentives that, that,~ um,~ encourage first time buyers to go brand new and buy off the plan. ~Um, ~I want to urge extreme caution in this space because there is so much evidence of the risks in that type of property. ~Um, ~but yeah, it's just interesting. As I said, the government's prepared to invest more in these, these types of properties and they're actually over time.

You know, have delivered the smallest in terms of returns. So it's we, they're not investing our money wisely.

And then understanding that, like you said, from an asset quality point of view, what is the data telling me if I buy this certain kind of property?~ ~

CB: ~um,~ if we were at lower building costs,~ um,~ and developers could make it stack up to produce cheaper apartments right now, we'd absolutely see a building boom and the first time buyer incentives would go through the roof. It's just the good thing about this policy, they are in introducing at a time when developers can't.

And then they've also seen fomo. 'cause the prices have moved so much in the last three months, they've been looking. They've can't find anything good. And they've even seen the poor properties go up right now and they're just going and buying, you know, a high density apartment in an area that's not scarce often.

We're building issues so all the government's done is just basically handball. All the investors who have bought cheap apartments in the last boom are just handballing 'em off to all these sort of desperate first time buyers and they don't know what they're buying, you know, they, they're just buying as part of this scheme and you know.

And there's a lot of people who have been marginalized over the last few years because their incomes just can't afford to enter the market. This is a way for them to finally get rental and home security for them, which they really need. And but the expansion of it since October, I think it's just absolute ridiculous.

~Um, ~and whatever benefit there was has been,~ um,~ gone up in prices to offset that benefit. ~Um, ~and you know, those people often, those on higher incomes and higher purchase prices, ~um. ~Probably would've got there as well. I would've found other ways to get there anyway, you've just said, Hey, you don't need to do that hard work.

You can enter now. And then you flooded 'em all in the market at one point and you just pushed up prices. ~Um, ~and then they've, they haven't really won. The only ones who maybe won is the ones who've got in early and Preto. ~Um, ~and, and that was the ones who, so it's not been a very successful scheme in my eyes, but, you know, the government are out there sort of pedaling how successful it's been.

VM: Like anything in property, it really needs to be measured five or 10 years down the track and then we can work out how successful it's been. Hey Jake, do you have a property Dumbo for us? 'cause we like to end the episode with an example. We've been talking about lessons I guess people can learn from, but do you have a particular story for us?

Jack: ~Um, ~look, not really particularly within first home buyers. There's a lot of kind of stories that come to mind just with kind of that pressure, like you talked about Chris. ~Um, ~a lot of first home buyers get into that market. They've got that pressure from the family. Just buy something. We did it 30 years ago.

VM: Brilliant. Thank you. I'm hoping this has been,~ uh,~ a very informative chat for our listeners if they've been wondering about these. These new schemes,~ uh,~ and some old schemes that we've talked about as well. So thanks for coming on, Jack.

Jack: Thanks for having me. I appreciate it.

Veronica Morgan: If you have a question that you'd like us to answer in an upcoming q and a episode, you can send us a voicemail or written question via the website. The elephant in the room.com au. Or you can email us directly at questions at the elephant in the room.com

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