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Housing

House Prices Could Rise More Than Expected After First Homebuyer Guarantee Scheme Changes

Strategic Insights

— 2 min read

The Australian government's decision to remove limits on the First Homebuyer Guarantee scheme is expected to spark a rise in house prices, with some experts predicting an increase of up to 15% over the next six years. The scheme, which allows first homebuyers to purchase a property with a 5% deposit and avoid paying lenders mortgage insurance, is set to be expanded from October, allowing buyers to use the scheme to purchase a home with as little as 5% deposit. The removal of income limits and the increase in price caps for the scheme are also expected to stimulate demand and push up prices.

Key Takeaways:

  • The First Homebuyer Guarantee scheme is expected to increase house prices by up to 15% over the next six years, with some experts predicting a more than 10% increase.
  • The scheme will allow first homebuyers to purchase a property with a 5% deposit and avoid paying lenders mortgage insurance.
  • The removal of income limits on the scheme will stimulate demand and push up prices, particularly in the first couple of years.
  • The scheme is expected to issue an extra 20,000 guarantees in the first year, with Treasury modelling suggesting that those people will also save tens of thousands of dollars in rent.
  • The scheme is a short-term solution to a long-term problem, with underlying challenges such as demand outstripping supply, tax incentives for property investors, and a shortage of tradespeople to build homes still needing to be addressed.
  • The government's decision to remove income limits on the scheme has been described as a "band-aid solution" by some experts, who warn that it will hinder long-term affordability at the expense of a short-term rise in first homebuyers.
  • The scheme is set to be expanded from October, with the price cap for the scheme increasing from $800,000 to $1.5 million in Melbourne, and from $900,000 to $1.5 million in Sydney.

Statistics:

  • The Treasury Department estimates that the scheme will increase house prices by around 0.5% after six years.
  • Diana Mousina, Deputy Chief Economist at AMP, predicts an additional 3% increase in house prices over the next six years.
  • Louis Christopher, managing director at SQM Research, predicts a more than 15% increase in house prices over the next six years.
  • The scheme is expected to issue an extra 20,000 guarantees in the first year.
  • Treasury modelling suggests that those people will also save tens of thousands of dollars in rent.
  • The government's Housing Accord target is 1.2 million new dwellings over the next decade, but is expected to fall short by around 79,000 dwellings.
  • The supply of new housing is near its lowest level in a decade, with 177,000 dwellings completed in 2024, falling short of underlying demand for housing of around 223,000.

Sources:

  • "The First Homebuyer Guarantee scheme is set to be expanded from October, with the price cap for the scheme increasing from $800,000 to $1.5 million in Melbourne, and from $900,000 to $1.5 million in Sydney." (Henry Zwartz)
  • "The Treasury Department estimates that the scheme will increase house prices by around 0.5% after six years." (Henry Zwartz)
  • "Diana Mousina, Deputy Chief Economist at AMP, predicts an additional 3% increase in house prices over the next six years." (ABC)
  • "Louis Christopher, managing director at SQM Research, predicts a more than 15% increase in house prices over the next six years." (ABC)
  • "The scheme is expected to issue an extra 20,000 guarantees in the first year." (Henry Zwartz)
  • "Treasury modelling suggests that those people will also save tens of thousands of dollars in rent." (Henry Zwartz)
  • "The government's Housing Accord target is 1.2 million new dwellings over the next decade, but is expected to fall short by around 79,000 dwellings." (State of the Housing System report)
  • "The supply of new housing is near its lowest level in a decade, with 177,000 dwellings completed in 2024, falling short of underlying demand for housing of around 223,000." (State of the Housing System report)

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