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Prime Minister Anthony Albanese's government housing policies are once again under scrutiny. The expansion of the Home Guarantee Scheme is sparking debate over affordability as the Reserve Bank of Australia (RBA) warns that the Labor Party's plans aren’t good enough, with supply constraints likely to persist for years.
Starting today, the government has broadened access to its 5% deposit scheme, opening eligibility to all first-time home buyers, regardless of income. Property price thresholds have also been lifted to reflect market conditions.
Treasury forecasts suggest the change will add only a modest 0.5% to house prices in the next six years. Housing Minister Clare O’Neil defended the move on Wednesday, saying, “People around the country need help right now, that is what they are getting from our government today.”
Critics, however, argued the absence of means testing risks skewing benefits. Opposition frontbencher Julian Leeser said, “It’s a $60 billion scheme that’s not only open to low-income earners, but it’s open to billionaires as well.” He added that economists believe the scheme could lift prices by as much as 10%.
"Demand-side schemes alone won’t fix the shortage," said Duncan Maxwell, associate professor in Monash University, department of architecture. "Without urgent supply-side innovation within the sector, affordability pressures will continue and the benefits of home buyer assistance will remain short-lived."
The Coalition has hinted its alternative housing approach may include allowing early superannuation withdrawals to fund deposits.
The Labor Party's target of 1.2 million additional dwellings nationwide by 2029 remains under pressure. O’Neil has admitted the ambition is difficult, but insists lowering expectations is not the solution. “We are all going to need to lift. The Commonwealth will need to do more, the states will need to do more, and so will the private sector,” she said.
Building completions currently sit around 190,000 annually – well below the 240,000 needed each year to meet the target.
RBA Governor Michele Bullock downplayed the likelihood that government initiatives would alter the market in the near term.
“The problem in the housing market is a structural deficit of supply,” she said Tuesday, following the central bank's latest decision on monetary policy.
"Governments now get that," Bullock said. "And you're now starting to see some action on that. But it's going to be slow to work its way through. It's going to take time. I'm not confident it's going to make any impact in the next two years."
Building approvals data underline the point. Total dwelling approvals in August fell 6% to 14,744. Master Builders Australia (MBA) labelled the figures “another blow” to the construction pipeline. MBA's Chief Executive Officer Denita Wawn added, “There is a clear gap between policy ambition and reality, with approvals going backwards, not forwards.”
For brokers and lenders, the policy mix of demand-side support and uncertain supply growth sets a complex operating environment. Guarantee-backed loans could potentially bring more borrowers into the market, but with limited new stock coming online, property market professionals should anticipate intensified competition for established housing.
Rising house prices, if they accelerate beyond Treasury’s modest forecast, could also further challenge serviceability assessments at a time when the RBA is signalling no rush to loosen monetary policy.
With affordability pressures mounting and approvals lagging, the housing sector faces a difficult balance between immediate access initiatives and the long-haul work of expanding supply.
Albanese's Home Guarantee Scheme came into effect three months earlier than initially expected. Under the national government plan, eligible first-home buyers can purchase a home with as little as a 5% deposit, regardless of income. Single parents and eligible single guardians may qualify with just a 2% deposit under the plan.
In addition, buyers do not need to pay Lenders Mortgage Insurance (LMI), potentially saving them tens of thousands in upfront costs. The government agency Housing Australia acts as a guarantor for the portion of the loan above 80%, up to 95% of the property’s value.
Australian citizens and permanent residents, 18 years or older, who have not owned property in Australia in the last 10 years qualify for the program. The property must be owner-occupied and not purchased as an investment or rental property.
Previously, there were income limits: $125,000 for individuals and $200,000 for couples applying together. Under the updated scheme, the limits have been scrapped, opening the program to a broader range of buyers. The government has also removed the cap on annual places, meaning eligible homebuyers won’t miss out simply because the scheme has reached capacity.
Additionally, property price caps have been increased in most areas. In Sydney and other designated New South Wales regional centers, for example, the cap was lifted from $900,000 to $1.5 million.
For would-be homeowners struggling to jump on the property ladder amid rising costs of living and surging property prices, the scheme could mean the difference between buying a home or missing out entirely.
And brokers have already started to notice the momentum.
"The scheme is opening doors. There's more confidence in the market; probably a little bit more FOMO now that doors have opened," Adele Andrews, Melbourne-based director and mortgage broker at Australian Property Home Loans, told Australian Broker.
"There's a broader scope of those who are eligible. I've got clients who I'm putting through this week who normally would not have qualified," she continued. "So we've been doing a bit more prep over the last couple of weeks."
The Victoria-based broker added that many clients are eager to enter the market now, anticipating further price rises as demand grows and the housing shortage continues.
"There's a bit of fear of that happening," Andrews said. "And I don't necessarily see any policies or solutions from the supply side of things coming."
Additionally, the director expressed skepticism that the program would benefit those most in need, those at the lower end of the income scale striving for homeownership.
"I think it will help people in that middle market a lot more," Andrews said, citing a couple with a $204,000 joint annual income who previously missed the cutoff. "The way that it was placed [before] helped those lower income earners by keeping the market at a certain level to enable them to get in. Whereas now, we've got people who can have unlimited income virtually; there's no income cap. So they can come in and buy with a 5% deposit and it's less pressure on them to do it."
Sydney-based mortgage broker Simon Orbell agreed there's been a surge of interest following the scheme's update.
“It's a hot topic," said Orbell, who serves as head of partnerships at Smartmove Professional Mortgage Advisors. "We’ve run multiple webinars since the announcement and they’ve been warmly received.
He added that the increased property price caps are once again making homeownership in cities like Sydney and Melbourne a viable option, “where many first home buyers want to live. For a long time, people felt shut out of these areas, and now there’s a real sense of opportunity.”
But some brokers say location is actually hindering progress.
In the Northern Territory, for example, the property price caps have remained unchanged at $600,000.
"If you're looking for a proper house on land, you're looking at at least $700,000 or more," said Darwin-based Janine Ashmore, cofounder and director at Bliss Home Loans. "So it's probably going to have minimal impact. It doesn't really address the housing shortage because it doesn't hit, in any way shape or form, the new build market.
"Some people will get in, but only as long as they only want a smaller unit or apartment," she continued. "So younger people, people in their early twenties; they've graduated uni, lived at home and saved, and used the 5% deposit scheme to get into the market, between the $300,000 and $400,000 mark. Or, I've seen quite a bit of, maybe, younger couples, who want to get a townhouse or something.
"But with the housing shortage, up here, we just need more houses built," Ashmore said.
