Labor pours fuel on hot housing market

Scott Kuru August 26, 2025 4 min read

Image by Oscar Colman/AFR

KEY POINTS

Labor will bring forward the expansion of its First Home Guarantee scheme to October, scrapping income and place limits while lifting property price caps
Developers and real estate groups have praised the changes as a practical boost for first-home buyers, but critics argue it’s poorly targeted
The Opposition calls it “bizarre” that billionaires’ children can now access taxpayer-backed support, while the Greens warn it could further fuel the housing crisis

The Albanese government has brought forward the start date and broadened one of its signature policies for first-home buyers, leading to warnings it will further boost home prices just as price growth is picking up around Australia and interest rates are falling.

Significantly, the government is not shying away from the fact the scheme may raise property prices in the short term.

The details

A planned expansion of the Federal government’s First Home Guarantee scheme, which allows buyers to purchase a property with as little as a 5% deposit, has been brought forward three months to the 1st of October this year.

The scheme enables first-home buyers to buy a home with less than the standard 20% deposit and avoid paying lenders' mortgage insurance (LMI), with the government essentially acting as guarantor for the balance of the deposit.

From October, all restrictions will be removed on income eligibility and the number of places in the scheme, while price caps on the properties that can be purchased will be lifted by as much as 2/3rds.

Aug26-PriceCaps

For example, an eligible first-home buyer in Sydney, Newcastle or Wollongong will be able to purchase a property worth up to $1.5 million (previously the cap was $900,000), while first-home buyers in Brisbane, the Gold Coast or the Sunshine Coast will see the price cap jump from $700,000 to $1 million.

In Melbourne and Geelong, the updated scheme will see the cap increase by a more modest amount - from $800,000 to $950,000.

Modelling by the Federal Treasury shows that an estimated 20,000 more first-home buyers will now be in a position to qualify for the scheme than the original 50,000 places.

Federal Housing Minister Clare O’Neil says the updated scheme will make it “faster and easier for the young people around our country to get their foothold on the property ladder.”

Warm welcome

Not surprisingly, the scheme has been warmly welcomed by sections of the property industry, particularly those that represent big developers and real estate agents.

“Policies that boost supply and provide targeted support for entry into the housing market are essential,” says Real Estate Institute of Australia president, Leanne Pilkington.

“This is a significant and practical step towards addressing the affordability challenge.

“The removal of caps on income and places, along with increased property price thresholds, brings the scheme more in line with current market conditions.”

The Property Council of Australia’s CEO, Mike Zorbas, says the fast-tracking of the scheme is overdue.

“The average age of first-home buyers in our capital cities is approaching 40 and we must pull every available lever to help them into a home,” he says.

Brick-bats

However, the Federal Opposition is scathing.

When asked if it would make housing more equitable for young Australians, the Opposition’s Housing spokesman, Andrew Bragg, was blunt:

“Equity for who?

“This is an uncapped scheme which is available to billionaires, or the children of billionaires, if they want to use a government program.

“And I think we're getting to a point where Australia is becoming a ridiculous nation where the taxpayer is under-writing mortgage insurance schemes for extremely wealthy people.

“I think it's bizarre and ridiculous,” he told the ABC.

Higher home prices

The Greens say they worry the scheme will push up prices further, particularly at the more affordable end of the property market, typically targeted by first-home buyers.

“When we assist demand, we drive up housing prices and we make the crisis worse,” says Greens Senator Barbara Pocock.

Independent Housing analyst Cameron Kusher agrees.

“For people wanting to buy a first home this is great news, but these policies just repeat the mistakes of previous first-home buyer grants,” he says.

Mr Kusher admits the scheme means some first-home buyers are likely to access home ownership sooner than they otherwise would be able to, and with a smaller deposit.

But he says this “is more demand-side stimulus occurring at a period where prices are rising and interest rates are falling, which is expected to lift housing prices even further.”

And that, he says, will mean future governments will have to use even more taxpayers money to assist first-home buyers.

The Treasury modelling released with the expanded scheme shows it will push home prices up modestly, adding an estimated half a percent to national property prices over six years.

However, launching the expanded First Home Guarantee scheme in Canberra, Prime Minister Anthony Albanese was unapologetic.

“What it does is make sure that we get more people into the market,” he said.

“You’ve got to look at nothing in isolation.”

My view

At a time when the property market is already picking up steam and interest rates are falling, giving more first-home buyers access to free deposit guarantees will inevitably see many younger Australians take on more debt that they probably should.

The scrapping of income restrictions and the huge jump in home price caps - particularly in expensive cities like Sydney - will simply end up helping to push up prices even more, especially at the more affordable end of the market.

The property market is already heating up, and this is simply pouring petrol on the fire.