Entering the housing market has become increasingly challenging over the last decade with prices skyrocketing and lending criteria tightening.

This trend has been increasing throughout Australia and, especially, in Lismore and the Northern Rivers where housing is more scarce since the February flood.

If you wanted to buy a house in South Lismore for example, you cannot get a loan because you can't get insurance so it is a cash upfront deal, even if the house is cheaper. Then if you want to buy out of the flood zone, you are looking at prices in the $650,000 plus range with loans difficult to get depending on your income.

A financial comparison website, finder.com says “with house/land prices forecasted to fall through 2022 and home loan rates rising for the first time in over a decade, we may soon witness a market downturn. Owner-occupier lending is already starting to slow, particularly among first home buyers who typically have lower budgets and are more sensitive to house prices.”

Hope for first home buyers is not lost with the NSW Government is launching a shared equity trial scheme to make homeownership more achievable for single parents, older singles and key worker first home buyers.

The NSW Government will pay a proportion of the purchase price of a property in exchange for an equivalent ownership share of the property. The NSW Government equity contribution is up to 40 per cent of the purchase price of a new dwelling and up to 30 per cent of the purchase price of an existing dwelling.

The purchaser must have a minimum deposit of 2 per cent of the purchase price, with no lenders mortgage insurance required.

No repayments are required on the equity contribution and no rent or interest will be charged while a participant remains eligible for the scheme. Participants can make voluntary payments to progress to full ownership of their property.

The shared equity scheme is open to:

• a single parent of a child or children under 18 years of age
• a single person 50 years of age or above, or 
• first home buyer key workers who are nurses, teachers or police.

The gross income of the household must be no more than $90,000 for singles and $120,000 for couples.

The participant must be buying a home with a property price less than $950,000 in Sydney and major regional centres (Newcastle, Lake Macquarie, Illawarra, Central Coast, North Coast of NSW) or less than $600,000 in other regional areas.

The participant must be at least 18 years of age and be an Australian or New Zealand citizen, or a permanent Australian resident.

The participant must have a minimum deposit of 2 per cent of the purchase price.

The participant must occupy the property as their principal place of residence.

The participant must not own an interest in any land in Australia or overseas at the time of purchase.

The participant must not be able to service the mortgage for the property purchase without the Government equity contribution but be able to service the mortgage with a participating lender with the Government equity contribution.

All purchasing and selling costs (including stamp duty) are the responsibility of the participant of the shared equity scheme however.

Participants in the shared equity scheme would remain eligible for First Home Buyer assistance and any duty or land tax concessions.

To maintain eligibility, participants’ ongoing obligations include:

• Annual review: Each year following the property purchase, scheme participants will be required to complete an annual review and provide supporting information to ensure their continued eligibility for the shared equity scheme.
• Maintenance and improvement of property: Participants are required to maintain their property and keep things in good working order. The Government must approve certain modifications or renovations so that the value of this changes can be factored into the eventual sale price of the property. 
• Responsibility for property costs: Property costs such as council rates, body corporate fees, water and home loan repayments are the responsibility of the participant.

A participant will be required to begin repayment of the Government’s equity contribution in certain situations, including where they no longer meet eligibility criteria. Revenue NSW will work with participants in meeting this obligation.

If a participant’s income exceeds the applicable threshold on two consecutive annual review reporting dates, they will be required to begin repayment of the Government’s equity contribution.

The scheme is planned to begin in January 2023 and will accept applications during two financial years (2022-23 and 2023-24). 

There will be 3,000 places per financial year.

While the scheme will support entry into the market Marilyn Coles, a Lismore Mortgage Broker with Mortgage Choice says she is concerned that with the interest rate level rise, it's important for people entering the market, to enter with awareness about the potential for increases and whether that will put them under considerable financial strain, or mean they cannot service that loan.

"This is why I like to work with my clients early, to support them through the whole process, being aware of savings plans and what to be aiming for and how to achieve things, so they are supported along the whole journey."

Examples given by the NSW Government of potential applicants for the Shared Equity Scheme: 

Single parent in Sydney

For an eligible single parent in Sydney buying a new home at the maximum price of $950,000, the 40 per cent equity contribution would be a maximum saving of $380,000. This equity contribution would lower monthly mortgage repayments by around $1,800 (assuming an interest rate of 4 per cent over a 30-year term).

First home buyer teacher in Wagga Wagga

For an eligible first home buyer who is a teacher in Wagga Wagga buying an existing home at the maximum price of $600,000, the 30 per cent equity contribution would be a maximum saving of $180,000. The equity contribution would lower monthly mortgage repayments by around $860 (assuming an interest rate of 4 per cent over a 30 year term).

Information about the shared equity scheme can be obtained from Service NSW on 13 77 88 or via the website here