Study shows single Sydney buyers unable to make use of FHGS threshold boost

An increase to the price threshold in the First Home Guarantee Scheme (FHGS) could see thousands of single first home buyers in Sydney excluded despite opening up more choice for couples.

On Monday the Federal Government announced it would increase the current threshold of $800,000 to $900,000 for NSW metropolitan properties purchased through the scheme in the 2022-23 financial year.

While this would widen the scope of suburbs in Sydney where home buyers could buy a house, new research from comparison site Canstar has revealed that the average single homebuyer would need to earn an after-tax income of $149,868 a year in order to borrow the amount required for a property worth $900,000.

The current income caps under the scheme fall short of this at $125,000 for individual buyers.

Single home buyers may not be able to purchase a property worth $900,000 through the FHGS due to income thresholds. Picture: Sam Ruttyn

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Canstar said that single buyers earning a gross yearly income of $125,000 had a borrowing capacity of about $814,000 – just $14,000 more than the current price cap of $800,000.

A single buyer on the same income with a car loan was restricted to a loan size of $713,000.

In contrast, the research showed a couple would need a combined after-tax income of $155,934 a year in order to qualify for a loan under the scheme if they were purchasing a house worth $900,000.

An income cap of $200,000 currently applies for couples under the FHGS.

Canstar editor-at-large Effie Zahos Picture: Tim Hunter.

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The research looked at the income requirements for a single buyer with a car loan and a dual-income couple with a car loan and two children, taking out a loan with a 5 per cent deposit and an average 2.99 per cent variable interest rate.

For tax purposes, the analysis assumed there was an even split in earnings between the couple.

Canstar editor-at-large and money expert, Effie Zahos said affordability was an important consideration.

“The government may have increased property price caps under the scheme, but this doesn’t necessarily mean borrowers can afford the repayments, especially when you consider the average gross Australian wage is $90,917,” she said.

“The first Reserve Bank cash rate increase is expected to happen in June, so prospective buyers should make sure they factor potential rate rises into their budgets, and allow for some extra financial wiggle room ahead of time.”

An increase to the FHGS threshold could offer more choice for couples and families. Picture: David Swift

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Aureus Financial head of finance Ben White said the increase was “like a band aid solution” and that first home buyers should carefully examine what they could afford.

“The first homeowner grants don’t seem to be for Sydney,” he said.

Finance strategist Jay Ahluwalia said while the scheme was a leg up for eligible first home buyers, the numbers didn’t stack up.

“The increase of the limit doesn’t do much in and of itself,” he said.

Eagle Vale is one of 56 suburbs in Greater Sydney where you can buy a house for less than $800,000.

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“There is an underlying issue of stock. There has to be investment made in infrastructure and housing simultaneously.”

The increase comes after the government announced it would increase the number of spots under the scheme to 35,000 as part of its budget package.

At the time, it wasn’t known whether the price thresholds would be increased in line with the double digit price growth that occurred last year across much of the country.

Data from realestate.com.au reveals there are just 56 suburbs in Greater Sydney where the median price of a freestanding home is $800,000 or less.

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