There is a growing panic in the property market.

Everyone’s predicting that inflation and interest rates will continue to surge. With its ripple effect in the economy, let us look at some of the new government schemes that are on the cards particularly for home buyers.

The First Home Guarantee Scheme

The scheme, formerly known as First Home Loan Deposit Scheme, is an Australian Government initiative to support eligible first home buyers purchase their first home sooner with as little as a 5% deposit.

From July 1, five more lenders will join the Home Guarantee Scheme – Credit Union SA, Illawarra Credit Union, IMB (trading as IMB Bank), Newcastle Permanent Building Society, and Unity Bank – increasing the reach of the scheme to qualified homebuyers.

Since its launch in 2020, the National Housing Finance and Investment Corporation (NHFIC) has helped over 61,000 Australians in purchasing or constructing a home with women and key workers making up the majority of those helped (as of May 31, 2022).

NHFIC expects to offer 50,000 new spots for the program come next year.

Albo’s “Help to Buy” Scheme

On top of this is the new Albanese Government’s promise on a new housing policy coined as the “Help to Buy” scheme, pledging 40% equity purchase for a new home, and up to 30% for an existing home.

Albo pledged $329 million to assist 10,000 eligible Australians every year who wants to enter the property market.

Under Help to Buy, qualifying for a standard home loan with a participating lender will only require a deposit of 2% (or more) of the purchase price; it will also not require homebuyers to pay lenders mortgage insurance (LMI).

NSW Shared Equity Scheme

Resembling the Albanese scheme is the New South Wales Shared-Equity plan, where it is expected to release a $2.8 billion housing package, including a proposal for stamp duty reform.

Part of this is the $780.4 million commitment to assist eligible single parents and older single people aged over 50, as well as frontline workers such as teachers, nurses and police officers, contributing just a 2% deposit in buying a home.

This scheme will cover the cost of up to 40% for a new home or up to 30% for an existing home.

The Shared Equity scheme is available for 3,000 Australians each year – but could be expanded should the program be successful.

The Long-Term Economic Effect

These schemes may look all good at a glance since its purpose is to help homebuyers.

But the questions is, do these government schemes help the overall property market in the long term?

Obviously, the government tend to give more slots every year and even gives birth to new other similar schemes.

We must remember that mortgage rates are tied to the basic rules of supply and demand – as the government provide grants and subsidies to more and more buyers, it might actually inflate prices even more.

It’s also quite probable that the predicted future price changes will have an impact on the present market. People may postpone purchasing and selling if they believe house prices will continue to drop, resulting in a property market decline sooner than expected.

Looking at the current trend, I can say that the government won’t be quick at withdrawing these things and when we get a bounce back, the bounce will be more volatile.