Expanding access fuels optimism – and concern – among lenders
Australia’s housing market is expected to keep rising as government incentives and strong demand continue to outweigh supply constraints.
Economists say the recent expansion of the federal 5% Deposit Scheme could add further pressure, especially at the lower end of the market.
Ray White chief economist Nerida Conisbee said to Yahoo! Finance that affordable properties are expected to record the strongest price growth. “People hoping for prices to come down, it’s going to go in the opposite way, particularly for cheaper housing,” she said.
The expanded 5% Deposit Scheme, previously the Home Guarantee Scheme, allows eligible first-home buyers to purchase a property with only a 5% deposit and avoid lenders’ mortgage insurance.
As reported by The Guardian, the government has removed income caps and limits on applicant numbers, while lifting price thresholds across most regions – up to $1.5 million in Sydney and $1 million in south-east Queensland and Canberra.
Housing Minister Clare O’Neil told SBS News the changes will help Australians “start building equity in their own home rather than paying off someone else’s mortgage.” The government expects around 30,000 more buyers to qualify under the revised rules.
Mortgage broker Damian Wallace said interest in the program has doubled since the announcement. “This is not a 5 per cent deposit scheme; it’s a 95% borrowing scheme,” he told SBS News, adding that buyers should be mindful of larger loan repayments over time.
Despite policy efforts to ease entry barriers, affordability remains constrained. Yahoo Finance reported that Australia is 60,971 new homes short of its annual goal under the National Housing Accord. Construction costs also continue to rise, with data from Cotality showing a 0.6% increase in the September quarter and 2.5% year-on-year. Western Australia recorded the steepest quarterly gain at 1.3%.
“Particularly on the urban fringe, it is really, really difficult to build affordably,” Conisbee said.
The Westpac-Melbourne Institute Index of House Price Expectations rose 2.1% in October to a 15-year high, with three-quarters of consumers expecting prices to rise in the next year.
Borrowing power remains a hurdle for many Australians. According to SBS News, a single person earning the median income of about $73,000 can borrow roughly $250,000 to $275,000, while couples earning the same can borrow around $775,000. Wallace said additional fees and stamp duty often push total upfront costs close to 10% of the property price.
A report by The Conversation noted that while the scheme shortens the time needed to save a deposit, smaller down payments result in higher interest costs. Wallace estimated that buyers of a $1 million home could pay about $150,000 more over the life of the loan with a 5% deposit compared with a 20% deposit.
The Guardian reported Treasury expects the scheme to lift prices by about 0.5% over six years, though Westpac forecasts up to 9% growth in 2026. With construction lagging and the Reserve Bank of Australia cautious on rate cuts, analysts say strong demand and limited supply will likely keep the market tight through next year.
