Markets continue to question whether Australian property prices are headed higher.
Reserve Bank of Australia (RBA) Governor Michele Bullock dismissed concerns that government schemes — such as the 5% deposit scheme or the Help to Buy scheme — will cause increased market instability, including higher property prices.
Appearing before the Senate Economics Legislation Committee earlier this month, the governor said: "we have observed that there has been an increase in first homebuyer interest. I think we’ve seen a lift in that and in credit issued to first homebuyers. And we’ve also seen an increase in the loan-to-value ratios reflecting that.
"But we don’t have any concerns that that’s in any way threatening financial stability," she added.
In October, the government broadened access to its 5% deposit scheme, opening eligibility to all first-time home buyers, regardless of income. Single parents and eligible single guardians qualify with just a 2% deposit under the plan. Property price thresholds were also lifted to reflect market conditions.
In addition, buyers no longer needed to pay Lenders Mortgage Insurance (LMI), potentially saving them tens of thousands in upfront costs.
The Help to Buy scheme, by contrast, launched two months later, helping up to 40,000 eligible Australians purchase a home with as little as a 2% deposit.
Critics argued that the schemes could add further fuel to already elevated housing prices, with some estimates suggesting increases of up to 15%.
At the same time, the outlook is being shaped by competing forces, including higher interest rates that are limiting borrowing capacity, ongoing cost-of-living and inflationary pressures, and a persistent shortage of housing supply.
To address the housing shortage, the Labor Party has set a target of 1.2 million new dwellings nationwide by 2029. But recent approval data suggests that goal is slipping further out of reach.
Total dwelling approvals fell 3.4% in April. That's on top of 10.5% drop in March. And many approved projects may never make it through to completion.
Brokers on the ground remain divided over whether the housing scheme will push property prices higher.
Tracy Kearey, a broker at Brisbane-based Mortgage Advice Bureau (MAB) Australia said the impact remains uncertain.
"There's so many variables to the housing and first-time homebuyers are just one segment of it," she told Australian Broker. "Initially, when the scheme was expanded to include more expensive properties and included no income gap, there was a bit of a rush. But I've actually seen it slow down recently. The market cooled off a little bit due to the budget and interest rate rises and cost of living. So I don't necessarily feel that at the moment the scheme is going to make much impact.
"But I think, unfortunately, prices will rise," Kearey added. "But they potentially can plateau. And once again, as we all know, it's about supply and demand. And the lower end of the market sells quickly anyway, whether you're a first-time buyer or investor. It comes back to budget."
Joey Delis, a Loan Market broker in South Australia, said it was a "no brainer" that property prices will rise.
"Anytime you add government incentives to a specific spot in the market, you drive more demand in that area. But I think it's on a specific type of property," he explained. "The biggest issue at the moment is that — if we're talking specifically about first-time homebuyers — the negative gearing changes are pushing investors and first-time homebuyers onto the same types of property: new builds. So that $700,000 to $900,000 mark, the lower end of the market, I think that is probably going to have the most growth, in my opinion, over the next 12 to 24 months. Because that's where the demand is."
The proposed 2026 to 2027 financial year budget scraps the blanket capital gains tax (CGT) discount and limits negative gearing to newly-built properties, which could potentially disproportionately impact investors.
"If investors don't have any negative gearing benefits to buy older homes because those benefits are only on new homes — and first-time homebuyer grants and schemes are all assigned basically for new lending — you've now pushed investors and first-time homebuyers onto the same types of properties," said Delis. "You've actually increased demand on the exact type of properties that first-time buyers are trying to buy because of all the grants and schemes, which makes it that, fundamentally, they're now competing with investors for those properties."
But not everyone sees rising property prices as a given.
Suvidh Arora, co-founder and co-chief executive officer at Melbourne-based 42 Property, is unconvinced prices will climb.
"Because there's a lot of other things happening in the market right now, including the higher interest rates. And then, with all the government policies that are changing, we expect a lot of supply to come onto the market," he said. "So overall, I think, because there's so many different factors, it's the perfect storm happening right now. Just one particular factor is not going to impact the property prices going up. Therefore, I think prices will stay a bit contained in the short to medium-term."
