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

The Treasury published the Review of the National Housing Finance and Investment Corporation Act 2018. The report found that 75% of FHLDS beneficiaries could have received a loan to buy a property without assistance from the scheme. This happened within 12-30 months of the 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.

These results support the belief that the deposit scheme has mainly impacted demand over the medium- to short term.

The report states that FHLDS buyers would need to delay their purchase of their first home if they didn’t have other financial resources or were unable to save 20%. This is compared to five years for NSW.

According to the report, evidence suggests the scheme has “appears to have achieved its goal.”

There aren’t enough spots available to the scheme, so potential buyers who need it most won’t have the chance to reap its benefits.

The report indicated that other potential buyers may not be able afford LMI and finance without an FHLDS Guarantee.

“These potential buyers are advised not to purchase until they have secured an FHLDS job.”

The report revealed that around 12% FHLDS participants were living at incomes below what is acceptable for nonscheme loan applicants.

It attracted high interest

The report showed that the demand for the deposit program was very high the first year.

More than 8,000 guarantee slots were actually granted to first-homebuyers and settled buyers who had pre-approved financing within four months.

The next financial years saw a quicker uptake. Around 9,600 of 10,000 guaranteed places were settled or reserved in just four months.

The price of the impact

Because of its relative importance in relation to the overall housing market it was not possible to determine if the scheme had any price impact.

According to the Review, economists spoke with the Review. They noted that first-home buyer aid that only increases demand and not brings forward would likely lead to an increase in property prices which will largely cancel any benefit to first home buyers.

“Housing prices are not likely to adjust as fast as other asset values. Consequently, those who buy later may be more fortunate than those who bought earlier.