The Victorian government is launching a $500 million fund to help about 3000 people buy their own home.
The Victorian Homebuyer Fund will be available to people aged over 18 who don’t have an interest in real estate and who meet income thresholds.
Under the scheme, homebuyers will need a five per cent deposit, while the state government will pay up to a quarter of the purchase price in exchange for an equivalent stake in the property, which owners can buy out over time.
Aboriginal and Torres Strait Islanders will need a 3.5 per cent deposit and the government will contribute up to 35 per cent.
The value of the property can’t be more than $950,000 in Melbourne and Geelong, or $600,000 in the rest of the state.
Treasurer Tim Pallas says the fund won’t just be for first home buyers, and will be available to people who have owned a home in the past.
“We want to help people who otherwise cannot access the property market to be able to do so to acquire a home,” he told reporters on Friday.
The Corelogic home value index shows Melbourne house prices have risen 15 per cent in the past year, and 0.8 per cent in September alone.
Continued low mortgage rates, falling unemployment, and the accumulation of savings through the COVID restrictions last year are just some of the factors that have sent house prices through the roof.
Federal government initiatives like the First Home Loan Deposit Scheme and the New Home Guarantee have also contributed to strong demand.
But Mr Pallas rejected the suggestion the scheme would keep pushing up prices in an already hot market.
“We are not putting more money into people’s pockets, in effect what we are doing is giving them the opportunity to participate in a competitive market,” he said.
The government would recoup its share of the equity at market value when a property was sold, if home owners had not already opted to buy out the government’s interest.
That money would be returned to the fund to help other would-be buyers.
Mr Pallas said the fund would enable buyers to afford homes “around the median price”, and while the government would oversee the scheme, it would effectively use the banks as partners to assess borrowers’ capacity to repay mortgages.
“We are not talking about buying mansions, we are talking about people getting into a properly resourced and provisioned home,” he said.
The homebuyer plan has been launched just as the Australian Prudential Regulation Authority tightens lending rules.
APRA has told the banks it wants them to assess new borrowers’ ability to meet their loan repayments at an interest rate at least three percentage points above the loan product rate they are applying for.
Nationally, house prices have risen at the fastest rate in more than 30 years, with CoreLogic figures showing the value of Australia’s residential real estate market has now surpassed $9 trillion.