First Home Buyer Scheme Fuels Lower-Priced Property Growth

Recent data and analysis indicate a government initiative to assist first home buyers has seen increased participation and is correlated with stronger price growth for lower-priced properties. Concurrently, broader market confidence has cooled amid interest rate concerns.

Scheme Participation and Design

Government data shows a significant increase in the use of the Home Guarantee Scheme following changes implemented on October 1, 2023.

In the four months after the overhaul, 22,921 guarantees were issued, a 75% increase from the 13,105 issued in the prior four-month period.

The expanded scheme removed previous caps on borrower numbers, property prices, and income limits. It allows eligible first home buyers to purchase a property with a 5% deposit, with the government guaranteeing up to 15% of the loan value, which replaces the need for lenders' mortgage insurance.

Data indicates that almost two-thirds of the guarantees supported house purchases. Beneficiaries under 30 years old constituted two-fifths of participants, and nearly 30% of guarantees were for properties in regional areas.

Property Price Correlations

Research from property analytics firm Cotality indicates a correlation between the scheme's expansion and price movements.

In the six months following the October 2023 changes, eligible properties priced below the government's regional caps rose in value by 6.7%. During the same period, higher-priced properties increased by 3.6%.

This pattern was reported across most of the country. In Sydney, properties below the price cap rose 4.1% over six months, while higher-priced properties fell 1.1%.

The report acknowledged that stronger growth at lower price points also reflects broader affordability pressures and investor activity. Investors comprised 40% of mortgage demand in the fourth quarter of 2023, adding competition in the lower-priced segment.

Analyst Perspectives on Impact

Analysts have presented differing views on the scheme's effects:

• Cotality research director Tim Lawless stated the expanded scheme likely temporarily lifted home ownership rates but warned it could work against improving housing affordability by boosting demand without addressing supply.
• AMP deputy chief economist Diana Mousina expressed concern that the scheme might primarily benefit individuals who can access familial financial support. She identified supply issues as the primary driver of housing unaffordability, noting that demand-side policies could increase prices long-term without a corresponding increase in supply.
• A spokesperson for Housing Minister Clare O'Neil said the government makes no apologies for helping first home buyers while working to fix a supply problem, adding that without the scheme, many buyers would be unable to enter the market.

Estimates on the scheme's potential impact on property values vary. Government modeling in October 2023 suggested the changes would raise property values by 0.5% over six years. The Insurance Council of Australia projected a potential 10% increase in values within the first year.

Broader Market Context

Recent interest rate hikes have become the biggest concern for the property market, according to an Australian Property Institute index, outweighing earlier issues like housing shortages. The overall market confidence index fell to 6.1 in early 2026 from 7.1 the previous quarter.

Reserve Bank Governor Michele Bullock has stated that chronic housing undersupply will continue for at least the next two years. While Sydney and Melbourne home prices edged lower over the first quarter of 2026, price growth continued in most other markets, with Brisbane prices increasing by 5.1% in the last quarter of 2025.

Analysts note that buying with a 5% deposit means taking on a loan for 95% of the purchase price, which can leave borrowers more exposed to higher repayments if interest rates rise.