The housing support rolled out during the pandemic may have exacerbated the challenges many first-home buyers in the current market face, according to a study from UNSW Sydney.

According to the study, 71% of first-home buyers in New South Wales said their purchase price range had increased throughout the pandemic.

Meanwhile, 83% said the process had become harder and more complex, making it more difficult to access home ownership.

The study surveyed first-home buyers in New South Wales about their experience of entering the housing market during the pandemic, particularly at a time when economic policies were taking effect, including interest rate cuts, superannuation withdrawals, mortgage payment pauses and income supplementary programs.

UNSW discipline director of construction management and property Chyi Lin Lee said economic policies, even those aimed at promoting homeownership, may have been to the detriment of first-home buyers by driving up demand for housing and overheating the market.

“The pandemic saw extraordinary economic responses from the government to stabilise the economy and businesses, but they arguably had unintended consequences for first-home buyers that put them in a more disadvantageous position than before the pandemic,” he said.

Barriers becoming harder to overcome

Mr Chyi Lin Lee said the deposit gap remains a key barrier for first-home buyers, especially as prices continue to soar. Figures from Domain, for instance, saw house prices increased 21.9% over the year to September 2021.

“As income to house price ratio continued to expand during the pandemic, first-home buyers reported taking longer to save up a deposit,” he said.

“Meanwhile, investors, particularly those already in the market who benefited from soaring house prices, can refinance for another purchase and are seen to outbid first-home buyers easily.”

For 48% of the first-home buyers in the study, inequality is a significant challenge, with investors having the advantage from favourable tax policies when holding or selling property.

“Not only do policies of discount capital gains tax and negative gearing encourage investor activity and further pressure house prices, but monetary policy, such as record low interest rates during the pandemic, may be considered further stimulus to encourage investing,” Mr Lee said.

How first-home buyers are getting by

According to the study, first-home buyers are increasingly relying on the bank of mum and dad, taking on more financial risks, or relocating to regional areas to be able to enter the market.

Only a quarter of respondents considered paying the typical 20% deposit, while a fifth were able to receive assistance from family and friends with their deposit. Meanwhile, 12% of respondents said they have received a guarantee that helped them purchase a home.

For 77% of first-home buyers, purchasing any property was more important that finding their ideal home.

“Even before the pandemic, many first-home buyers were finding it difficult to get into the market, with many predicting the situation will likely get worse,” Mr Lee said.

“This is driving a fear of missing out, resulting in many taking on higher levels of debt, rushing into purchases without completing thorough due diligence, relocating for affordability reasons or reducing their expectations for their first property.”

And while 72% of first-home buyers were potentially eligible for some form of government assistance, only 30% actually obtained the needed boost.

Overall, more than two in three first-home buyers think that the current government support was insufficient in the current setting given the property prices.

“Policymakers should consider expanding support for first-home buyers beyond demand-side subsidies and invest more resources into supply-side interventions, primarily introducing more housing into the market,” Mr Lee says.

“This would help buyers who may be disadvantaged by the effects of the pandemic economic stimulus measures long after they have finished.”

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.04% p.a.
6.06% p.a.
Principal & Interest
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5.99% p.a.
5.90% p.a.
Principal & Interest
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
6.14% p.a.
6.16% p.a.
Principal & Interest
  • Find out your loan eligibility in 2 minutes or less
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5.95% p.a.
5.95% p.a.
Principal & Interest
5.94% p.a.
5.95% p.a.
Principal & Interest
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of .


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