Most of the media’s attention has been on Labor’s First Home Guarantee scheme, which came into effect on Wednesday.
Under this scheme, almost all first home buyers can purchase a home with only a 5% deposit, without requiring lenders’ mortgage insurance, as taxpayers will guarantee 15% of the mortgage.
Lateral Economics estimated that the 5% deposit scheme could raise national home prices by an additional 3.5% to 6.6% in 2026 and for several years thereafter.
However, in areas targeted by first home buyers, which are defined as those below the scheme’s generous price limits, the impact is predicted to be considerably higher, with property prices expected to increase by 5.3% to 9.9%.
The First Home Guarantee scheme is already proving popular, with real estate agents reporting strong interest from prospective first home buyers.
Worryingly, investor demand also appears to be surging.
As illustrated below by Justin Fabo from Antipodean Macro, investor housing credit growth soared in August, up 9.1% annually, and the highest rate in a decade.
Fabo also shows that Google searches for “investment property” have surged to their highest level in at least two decades:
The surging interest from first home buyers and property investors alike follows a commensurate rise in Westpac’s house price expectations survey, which hit a 15-year high in August:
Thus, Australia’s housing market is facing increasing demand from all sides that will inevitably drive prices further from their already lofty heights.
This represents an unmitigated disaster for Australian housing affordability, which already ranks among the poorest in the world.
