Stronger gains in sub-cap segments highlight shifting demand from borrowers and investors
Lower-priced dwellings that fall within the expanded Home Guarantee Scheme price caps have risen in value faster than more expensive properties since September, according to new figures from Cotality
In the December quarter, properties priced below the caps recorded an average value rise of 3.6%, compared with 2.4% growth for homes sitting above the caps.
Cotality’s analysis suggests that expectations of greater competition after the scheme’s 1 October start date may have brought forward some purchasing decisions, including from borrowers who did not need to rely on the guarantee itself.
At the same time, higher interest rates and serviceability limits appear to be steering more borrowers towards cheaper segments of the market.
“The expanded 5% deposit guarantee has sharpened demand at lower price points, with under cap markets outperforming across almost nine in 10 regions,” said Tim Lawless (pictured right), research director at Cotality.
“We’re seeing a clear shift in momentum, with buyers increasingly targeting homes that fall under the new price caps – especially in Sydney, where the value gap is most pronounced.
"This trend was already visible before the scheme’s official start on 1 October, suggesting some buyers acted early to secure properties before competition increased.”
Investor participation is also stronger at the lower end of the price spectrum, with investors competing directly with first-home buyers and other owner-occupiers.
Cotality noted that investors accounted for 41% of mortgage demand in the September quarter, while annual investor credit growth is rising at its fastest pace since December 2015.
The pattern of stronger value growth for properties under the scheme’s price caps is evident across all capital city and regional markets except the ACT.
Sydney shows the largest gap: during the December quarter, sub-cap homes in Australia’s biggest city rose 2.3% in value, while properties above the cap recorded a slight 0.1% decline.
Across the country, 89% of SA4-level regions showed faster growth for homes priced under the caps, with 78 out of 88 areas analysed posting superior gains in that segment.
Cotality’s findings indicate that the expanded deposit guarantee has coincided with, and likely reinforced, heightened demand for lower-priced homes, contributing to their stronger value performance relative to higher-priced stock.
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