First-home buyer scheme under fire for driving up property prices
Australia’s 5 per cent Deposit Scheme, expanded in October, has seen 300,000 national participants since 2020 but is accused of inflating property prices and creating highly leveraged households amid soaring interest rates. Data shows limited impact on new construction, with uptake concentrated in NSW growth corridors like Campbelltown and Parramatta, where median prices for singles and couples reached $606,000 and $800,000 respectively.
Australia’s federal 5 per cent Deposit Scheme, formerly the First Home Guarantee Scheme, has faced criticism for potentially worsening housing affordability despite its goal of aiding first-home buyers. Since its launch in 2020, the scheme has helped nearly 84,000 buyers in New South Wales and 300,000 nationwide, with participation surging after its expansion in October. The program allows eligible buyers to purchase properties with as little as a 5 per cent deposit, eliminating the need for lenders mortgage insurance while the government guarantees part of the loan. Critics argue the scheme has driven up demand without addressing supply shortages. REA Group economist Anne Flaherty noted that the policy pushes prices higher by increasing demand, while Housing Australia data revealed only 4 per cent of NSW participants (around 3,400 buyers) triggered new construction. Nationally, new builds accounted for just 10 per cent of total scheme uptake, with 28,500 properties constructed. Demographic data challenges the government’s narrative of assisting struggling buyers. In NSW, 51 per cent of participants were over 30, while single mothers—often prioritized in housing policy—made up just 1.3 per cent of users. Key workers in health, education, and emergency services accounted for 19.7 per cent of participants. The scheme’s impact has been strongest in outer Sydney suburbs like Campbelltown, Liverpool, and Schofields, as well as regional areas such as Wyong and Wagga Wagga. Buyers using the scheme typically purchase properties with razor-thin 5-6 per cent deposits, leading to larger mortgages and higher interest payments. The median purchase price for singles in NSW was $606,000, while couples paid a median of $800,000. Buyer’s agent Zac Jacobs warned that while the scheme helps buyers enter the market earlier, they face the burden of repaying bigger loans. Mortgage Choice broker Luke Camilleri acknowledged the scheme’s benefits but cautioned that increased demand has pushed prices higher for homes under the $1.5 million cap. Tori Porter, 32, and her partner Jae-won, 34, used the scheme to buy their first home in Whalan, noting the difficulty of saving even a 5 per cent deposit amid rising living costs. Their experience reflects broader concerns about the scheme’s long-term sustainability, as higher prices and interest rates may strain future homebuyers.
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