The West Australian government will expand its Keystart loan book by more than $420 million to help stimulate greater demand in the housing market.
Premier Mark McGowan says the plan to encourage more homebuyers to the property market would have a positive ripple effect on jobs and the WA economy.
“Extending Keystart’s lending capacity is expected to put more homebuyers in front of the building companies, thereby supporting the industry’s chances of retaining and creating jobs and stimulating the state’s economy,” McGowan says.
Last financial year, Keystart approved 2789 loans – 2169 of which were for construction or newly constructed homes.
More than one third of all first home buyers in WA access finance through Keystart.
Since it was established in 1989, Keystart has approved more than 66,700 loans – enabling more than 102,000 Western Australians to own their own homes.
“At the direction of the Australian Prudential Regulation Authority, banks have tightened credit controls in the past three to four years. The Banking Royal Commission appears to have accelerated this tightening process,” McGowan says.
“As a result, loan applicants’ expenses are under closer scrutiny. For example, the number of expense categories assessed by banks has increased and credit is harder to obtain.
“But Keystart offers an attractive alternative. As the most successful scheme of its kind in Australia, Keystart reduces financial barriers for Western Australians entering the property market.
“First homebuyers engaging a traditional lender generally require a deposit of at least 20 per cent of the property value in order to avoid paying Lenders’ Mortgage Insurance, but under Keystart the deposit for first homebuyers is as low as two per cent of the purchase price.
“Because Keystart also does not charge Lenders’ Mortgage Insurance, the total upfront costs are substantially lower than those charged by a traditional lender.”
The Urban Development Institute of Australia WA welcomed the announcement, saying the extension of the Keystart loan book would allow more new homebuyers to access to finance.
“UDIA has been advocating for the expansion of the Keystart service as one aspect to addressing housing affordability issues and allowing more first home buyers to get a foot in the property market door,” new UDIA WA chief executive Tanya Steinbeck says.
“Despite the current property market downturn in WA, first home buyers have continued to be active in the market with recent figures highlighting that first home buyers made up 25% of the total finance commitments for housing in WA in 2017-18.
“This is well above the national proportion of 14% and represents the significant role that this market segment can play in the property market recovery in WA.
“Supporting first home buyers and making housing more accessible is critical for the future growth of the state.”
The Housing Industry Association WA executive director Cath Hart praised the move.
“Increasing Keystart’s funds will help more West Australian’s buy affordable homes and delivers much-needed support for the local residential construction industry,” Hart says.
“The low deposit scheme has helped more than 100,000 West Australians buy affordable homes and the funding boost will help even more West Australians realise their home ownership dream.
“Building and construction employs 10 percent of the Western Australian workforce and yet faces tougher conditions than we have seen in years, so we hope that (this) announcement renews momentum in the WA housing market.”