Government incentives keeping housing market running hot, although student visa crackdown may have cooling effect
National home values climbed for the seventh straight month, with signs pointing to more momentum ahead.
The combination of falling rates, fresh first-home buyer incentives, and constrained supply is setting the stage for a strong spring market, bringing the usual affordability challenges with it.
New figures from Cotality show national dwelling values rose 0.7% in August, the fastest pace since May last year.
Capital city markets outperformed, averaging 0.8% growth, while regional markets rose 0.5%.
Several cities hit fresh record highs, with Brisbane (+1.2%), Adelaide (+0.9%), Perth (+1.1%), and Darwin (+1.0%) leading the gains. By contrast, Hobart (-0.2%) was the only capital to record a decline, while Melbourne (+0.3%) continued to underperform.
The national median dwelling value now sits at $848,858, with Sydney still the most expensive market at more than $1.22 million.
Commenting on the data, AMP Bank’s chief economist and head of investment strategy Shane Oliver made some bullish house price projections for the following 15 months.
“We now expect home prices to rise around 7% this year, but likely picking up to around 8-10% next year as rate cuts and ramped up support for first home buyers impact,” said Oliver.
“The key things to watch will be interest rates, unemployment and population growth,” Oliver continued. “For example, less cuts than we are forecasting, a sharply rising trend in unemployment and a sharp slowing in net migration could result in a resumption of property price falls. On the flipside a faster fall in rates and faster than expected population growth could drive a stronger upswing in property prices.”
What’s driving the upswing?
Policy changes are adding fuel to the housing fire.
The federal government’s expanded First Home Guarantee – allowing buyers to enter the market with just a 5% deposit – is now being brought forward to from January 2026 to this October.
Under the scheme, every first-home buyer in Australia, regardless of income, will be able to purchase a home with just a 5% deposit. The government will guarantee the remaining three quarters of an 80% LVR loan, avoiding the need for costly Lenders Mortgage Insurance.
The long-awaited Help to Buy scheme, offering a 30–40% shared equity option for up to 10,000 buyers a year, is also expected to launch later this year.
While these measures will help buyers into the market sooner, they are also expected to push demand higher, putting more pressure on already stretched affordability.
Three more rates cuts on the agenda, says AMP Bank
AMP Bank is forecasting three additional 0.25% rate cuts by the Reserve Bank of Australia, starting in November, followed by moves in February and May 2025. This would bring the cash rate down to 2.85%, a level AMP considers still moderately restrictive but more supportive of housing activity.
Oliver pointed to cooling inflation, subdued consumer spending, and soft business investment as key factors justifying monetary easing.
According to AMP, each rate cut could boost average borrowing capacity by around $11,000, helping to offset affordability constraints.
Slower population growth, reflecting a crackdown on student visas, could also have a cooling effect on house prices, Oliver added.
