Almost 70 per cent of first home buyers have been forced to suspend their home ownership plans after tapping into their deposit savings in the wake of the COVID-19 crisis, according to new research.
A new study from Gateway Bank – which involved a nationwide survey of 700 aspiring first home buyers (FHBs) – has found that 68 per cent of respondents have delayed their plans to enter the property market in response to the economic impact of the COVID-19 pandemic.
According to the research, approximately half (50 per cent) of respondents have dipped into their deposit savings since the onset of the crisis, 16 per cent of which have exhausted more than half of their deposit.
The most common reasons for accessing deposit savings cited by aspiring FHBs were paying for day-to-day expenses (45 per cent) and providing assistance to a family member experiencing financial stress (17 per cent).
As a result, more than half (56 per cent) of such respondents now expect saving for a deposit to take an additional one to three years, while a quarter (25 per cent) said they’ll require at least an additional three years to fulfil their home ownership ambitions.
“As more people are being forced to spend their deposit savings on basic living expenses, the prospect of buying a property is now even more elusive,” Gateway Bank CEO Lexi Airey said.
But Ms Airey said the “dream of home ownership remains alive”, particularly in light of the range of state and federal government incentives available to FHBs.
“Some first home buyers are taking advantage of government schemes in a bid to circumnavigate the need for a 20 per cent deposit,” she said.
However, the Gateway research found that just 56 per cent of respondents were aware of first home owner grants, just 32 per cent were aware of the First Home Loan Deposit Scheme, and just 24 per cent were aware of stamp duty concessions and the First Home Super Saver Scheme.
Moreover, 22 per cent of respondents could not identify any government schemes.
Ms Airey encouraged FHBs to explore their options and consider other low-deposit alternatives, including lender’s mortgage insurance and guarantor arrangements.
“Awareness of these measures is generally quite low, and those looking to enter the property market for the first time could be missing out on an opportunity to put their pre-COVID home ownership plans back on track,” she concluded.
The research comes amid renewed calls for policy reform to ease housing affordability pressures.
Most recently, Reserve Bank of Australia governor Philip Lowe said he would support the scrapping of stamp duty, which he described as a “tax on mobility”.
This followed the release of a report commissioned by the NSW Community Housing Industry Council, which proposed replacing stamp duties with a land tax.
NSW Premier Gladys Berejiklian and Victorian Premier Daniel Andrews recently confirmed that stamp duty reform would be considered as part of an economic agenda designed to rejuvenate the economy in the wake of the COVID-19 crisis.
[Related: RBA backs move to axe stamp duty]