How to purchase your first home?

The dream of purchasing a property can feel out of reach for many, largely due to the growing disparity between average wages and property prices.

According to The Australia Institute, 25 years ago, the average house price was equivalent to 9 years of the average household income. Now, it has risen to 16 and a half years, based on their research in March 2024. Factors contributing to this include the 50% capital gains concession, negative gearing, and the First Home Owner Grant.

Now that it's harder to purchase a property, what levers could you use to help buy your first home? There are a combination of levers available, including the First Home Super Saver Scheme (FHSS), the First Home Owner Grant (FHOG), and stamp duty relief.

What is the First Home Super Saver Scheme (FHSS)?

A government-introduced scheme, the FHSS, could be your key to homeownership. I won’t go into full details, as the ATO has outlined eligibility requirements, contribution limits, and restrictions.

The FHSS scheme is ideal for individuals saving for a deposit while living at home or sharing rental expenses with flatmates. For couples, the combined contribution cap is $100,000 ($50,000 per person).

Limitations:

• Contribution limits: As of December 2024, the maximum contribution allowed is $50,000 across multiple financial years, with a cap of $15,000 per financial year.

• Concessional Contribution Cap: Your FHSS contribution is taxed at 15% but cannot exceed $25,000 per year. If contributions exceed this cap, they will be considered non-concessional contributions.

• "Withdrawal Fee": You must request an FHSS determination outlining the maximum releasable amount. You will be charged based on the following:

  • Earnings from your contributions.

  • Your marginal tax rate plus the Medicare levy, minus 30%.

What is the First Home Owner Grant (FHOG)?

The Australian government introduced the FHOG, a one-time financial grant available to eligible applicants. However, different state governments offer different amounts and have varying eligibility criteria.

This grant is usually limited to those purchasing a new home, meaning a second-hand house may not be eligible. Therefore, if you prefer to buy an older home and renovate it, this may not be an attractive option.

However, a new home typically has higher depreciation benefits in the first few financial years, which could be useful for higher-income earners (as of 2025, those earning over $180K).

Stamp Duty

Stamp duty is essentially a tax imposed by state governments when you purchase a property. As a general rule, higher property prices attract higher stamp duty. However, certain states exempt or reduce stamp duty for first-home buyers. Additionally, if your property value is below a certain threshold, you may receive a further stamp duty reduction.

Stamp duty continues to change as property prices increase. It is important to consult professionals before making any decisions.

Foreign buyers usually do not receive exemptions and may also be subject to a foreign ownership surcharge when purchasing a property. So, if you are a non-permanent resident, it may be worth securing your visa first.

First Home Guarantee (FHBG)

Typically, banks require a 20% deposit for a home loan. If you don't meet this requirement, they consider the loan risky and impose Lenders Mortgage Insurance (LMI), increasing your monthly repayments. This is something you want to avoid, especially as a first-home buyer with a lower salary.

Good news—under this scheme, you can put down just 5% of the property value, with the Australian government (through Housing Australia) guaranteeing the remaining 15%.

This scheme may be particularly beneficial for people living in expensive cities like Sydney or Melbourne. However, if you can only afford a 5% deposit, you should consider whether you can truly afford the home. That said, keeping some funds in your offset account rather than locking them up in a deposit may be a strategic move.

A Regional First Home Guarantee (RFHBG) is also available. Be sure to check if your postcode qualifies before applying.

Note: There are limited spots available under this scheme.

Conclusion

It can be quite difficult to utilize all of these schemes when purchasing your first property. My suggestion: avoid the "fear of missing out" (FOMO) mindset and instead assess your situation carefully to determine which schemes are most relevant to you.

As with all financial products, read the terms and conditions carefully before using any of these schemes. Anything labeled "first home" usually requires you to live in the house for at least 6 months, so be sure you understand the rules before applying.

Why not assemble a team? Consider speaking with a mortgage broker, tax agent, buyers’ agent, and bank before making a purchase. Keep in mind that buyers’ agents and tax agents charge fees, so if you’re looking for a cost-effective option, a mortgage broker is a great first step. They won’t charge you directly—instead, they earn commission from the bank.

Using a mortgage broker can reduce your stress and expand your options.