With all the stresses this added to the system, the federal government’s expanded 5 percent deposit guarantee scheme was a real shot in the arm when it was introduced in October. It assisted first time homebuyers buy 5,778 homes that month. This figure is the equivalent of around one in ten sales, demonstrating the scheme’s substantial distortion of the housing market. Further, the program has eliminated the income ceilings that it had set earlier. Now, even more kinds of interested buyers can benefit from the deal!
Hobart and Canberra’s booming housing markets can occasionally appear to offer more exciting returns. Residential properties listed above the schemes limits are appreciating much faster on average than properties below the cap. Even within the borders of these established suburbs, homes enrolled in the program saw a higher price increase—1.7 percent—than non-eligible properties. By comparison, homes outside of the program increased only 0.4 percent. This trend of regional disparity in price growth highlights the reality of the scheme’s effect nationwide.
Regional Insights on Price Growth
Like Melbourne, other cities across the country mirrored this burgeoning trend. In Perth’s city center, homes eligible under the program jumped by 1.8 percent. By comparison, those properties excluded experienced an increase of just 0.8 percent. In Sydney’s northern beaches, home values for properties within the scheme actually increased by 0.9 percent. In comparison, homes not covered by the scheme experienced a complete reversal, with growth actually plummeting to -0.0 percent.
It tells a very different story that indicates the bottom of the housing market has been booming. It has now beat higher-priced segments on an absolute basis for almost two years. Most notably, inner Melbourne, Perth, northern Brisbane, Darwin, Geelong, the Central Coast, Wide Bay and Sydney’s inner city and northern beaches had obvious gaps in price growth. These places saw larger deviations than the national average.
“In some markets, there has been a more notable increase in values below the scheme thresholds, suggesting localised market impact.” – Thomas Clarkson and Eliza Owen of Cotality.
Performance of Different Property Types
The standalone house type under the scheme also continued to lead the pack with a monthly price growth rate of 1.3 percent as per October results. Units lagged behind with only a 1.0 percent increase. When compared historically, the performance we’ve seen in October looks especially strong. That ranks it in the top one-sixth of all annual totals recorded during the last 16 years.
First home buyers bought 1,800 more homes this time last year. Despite this modest increase, it’s clear a new landscape is being forged by government policy. While the program’s initial success is encouraging, it has tremendous potential to help address the growing gaps between housing available and new buyers looking to enter the market.
“This program is working, it’s making a big difference to the people who need our help, but only bringing a moderate number of new buyers into the market in this first month.” – Clare O’Neil.
Market Trends and Future Considerations
Market analysts warn against making direct cause-and-effect connections between increased prices and the scheme’s ramp-up without taking other contributing variables into account. Clarkson and Owen from Cotality stress the difficulty in proving a causal relationship. They equally emphasize the need to keep that zoomed-out lens. They found that it was too early to accurately estimate the impact of the expanded scheme on price appreciation. Most importantly, they called for an ongoing watch of what’s next.
Many stakeholders remain doubtful that the scheme will be effective in the long run. As we’ve documented, it’s undeniable that demand at the bottom of the housing market is increasing. Critics like Andrew Bragg argue that “Labor’s distorted 5 percent deposit scheme is driving demand at the low end and inflating entry-level prices,” underscoring ongoing debates surrounding housing policy and market dynamics.
