Victorian State Has Provided $1.1 Billion to Help Residents Buy a Home

The Victorian state runs a shared equity scheme with homeowners, paying up to 25 percent of the purchase price of a home.

A billboard advertises a home for sale in Melbourne on September 6, 2022 as Australia's Reserve Bank lifted interest rates to 2.35 per cent, the highest levels seen since December 2014, in an attempt to cool the country's overheated economy. (Photo by William WEST / AFP) Photo by WILLIAM WEST/AFP via Getty Images

The Victorian state government’s Homebuyer Fund, launched around two years ago, has supported more than 7,300 families to secure a home, of that number, two-thirds have been first-home buyers.

To date, the Fund has provided $1.1 billion in shared equity contributions.

In the early 2000s, it typically took someone living in the state 3.6 years to save a deposit; now it takes an average of 6.2 years. The Homebuyer Fund was established to significantly reduce up-front costs for families and individuals who might otherwise struggle to get a start in the property market.

The Fund contributes up to 25 percent of the purchase price, and reduces the required deposit to just five percent. This in turn helps buyers to avoid the need to pay expensive premiums on lenders’ mortgage insurance.

Homebuyers who come under the scheme would pay a deposit of only $30,000 on a $600,000 property, while the fund would contribute equity of up to $150,000. The maximum purchase price is $950,000 in metropolitan Melbourne and Geelong, and $600,000 elsewhere in regional Victoria. The median price of properties bought by Fund participants is $615,000.

Participants are permitted to earn up to $130,485 individually, or $208,775 as a couple.

Buy-Back Options

Homeowners can buy back the government’s share in their property over time through refinancing, using their savings, or upon sale of the property. Proceeds from these payments are then invested back into the Fund to support a new cohort of buyers.

Four lenders deliver the scheme in partnership with the government: Commonwealth Bank, Bendigo Bank, Bank Australia, and Indigenous Business Australia.

Treasurer Tim Pallas said, “Shared equity is a partnership that is helping thousands of Victorians take the keys to their own home. The Homebuyer Fund has been a success because it makes a real difference, while the very nature of the scheme means the impact on the state’s balance sheet is at worst neutral.”

The government does not receive any interest on its share of the investment, but it does share in any capital gains proportional to its stake.

The Fund has been progressively boosted since it was launched around two years ago, with the latest injection of $500 million announced as part of the Labor government’s Housing Statement—a multi-generational strategy to expand housing supply and affordability across Victoria.

Additional Concessions

People supported by the Homebuyer Fund are also eligible for first-home-buyer stamp duty exemptions and concessions, and First Home Owner Grants of $10,000. This separate support topped $780 million last financial year.

Preston resident Cassandra Bird bought her apartment for $350,000 last November, and says, for her, the backing of the Fund was the difference between being able to buy or being forced to continue renting indefinitely.

“The scheme made all the difference for me. I was saving money, but it was a slow process and the shared equity gave me the ability to access the market now.

“I was aware of the scheme but wasn’t sure if I’d qualify, but I’m glad I followed it up. It’s been amazing for me.”