Housing Market Boom Continues Amid Government's 5% Deposit Scheme

Strategic Insights -

The Australian housing market remains on an upward trend, with Sydney's median house price reaching a fresh record of $1.75 million, a 6.3% increase over the year to September. The 5% deposit scheme, aimed at encouraging first-home buyers, has brought forward the start date to October 1, but critics warn it may push up property prices by dragging forward demand. State and territory leaders have agreed to pause and streamline the National Construction Code, a 3000-page document updated every three years, to boost supply and affordability.

Key Takeaways:

  • Sydney's median house price has reached a fresh record of $1.75 million, a 6.3% increase over the year to September.
  • The 5% deposit scheme, which covers lenders' mortgage insurance for first-home buyers with deposits between 5% and 20%, has brought forward the start date to October 1.
  • Critics, including economists and experts, warn the scheme may push up property prices by dragging forward demand, with estimates suggesting it could increase annual demand by up to 39,000 buyers and drive national property prices up by 6.6% in the first year.
  • The increase in buyer activity and higher prices are partly a response to falling interest rates, which have fallen from a peak of 4.35% in December to 3.6% in October.
  • The National Construction Code, a 3000-page document updated every three years, will be paused until at least 2028, with changes related to safety and defects such as water ingress allowed as amendments.
  • The Urban Development Institute of Australia has welcomed the decision, saying it will help the industry deliver more homes, more affordably, and more quickly by reducing regulatory uncertainty.

Statistics:

  • Sydney's median house price: $1.75 million (Register of Companies)
  • Year-over-year increase in median house price: 6.3% (Domain House Price Report)
  • Interest rates: 3.6% (Reserve Bank of Australia)
  • Demand for first-home buyers: up to 39,000 buyers per year (Lateral Economics)
  • Potential impact on national property prices: 6.6% in the first year (Lateral Economics)
  • Property values across the country: grew by 0.6% in July alone, 3.7% higher over the past 12 months (Cotality's daily capital city dwelling value index)

Sources:

  • Domain House Price Report
  • Cotality's daily capital city dwelling value index
  • Reseve Bank of Australia
  • Lateral Economics
  • Register of Companies