Will the 5% Deposit Scheme Heat Up Australia’s Housing Market?”
Will the 5% Deposit Scheme Push Australian House Prices Higher?
As the government expands access to the 5% deposit scheme for first-home buyers, many are asking: Will this drive property prices up? Here's what the Reserve Bank of Australia (RBA) and other key voices are saying.
Q: What is the 5% deposit scheme and what is changed?
A: The scheme allows eligible first-home buyers to purchase a property with just a 5% deposit, without paying lenders mortgage insurance (LMI). Recent changes have removed income and price caps, opening the door for more buyers to enter the market.
Q: What does the RBA say about its impact on prices?
A: RBA Governor Michele Bullock told a Senate committee that the scheme could lead to a short-term increase in housing prices. However, she emphasized that the long-term impact depends on how quickly housing supply can meet rising demand.
Q: Why is supply such a critical factor?
A: Bullock highlighted that Australia’s housing challenges stem from a supply shortage. When demand rises—especially due to easier access to credit—prices tend to climb if supply can’t keep pace.
Q: Are there risks for buyers and taxpayers?
A: Yes. With more buyers taking on high loan-to-value (LVR) and debt-to-income (DTI) ratios, repayments will be higher. If property values fall, these buyers could face negative equity. Bullock also warned that taxpayers may bear the cost of defaults under the government guarantee.
Q: What does the Prime Minister say?
A: Prime Minister Anthony Albanese acknowledged a slight price increase but described the impact as minimal. He noted that over 185,000 Australians have already benefited from the scheme.
Q: What do Treasury estimates show?
A: Treasury projects a modest 0.5% rise in property prices over six years, with around 20,000 additional first-home buyers entering the market due to the expanded scheme.
Q: Is buyer interest already increasing?
A: Yes. A recent Agile Consumer survey found that one in six respondents accelerated their home-buying plans specifically because of the policy change.
Wakim Realty Takeaway
The updated 5% deposit scheme is great news for first-home buyers, making it easier to get a foot in the door. But it also adds more heat to an already competitive market. If you're thinking about buying or selling, it's worth knowing how these policy changes can shift supply, demand, and risk—so you’re not caught off guard.
Need help navigating the market?
Reach out to Wakim Realty for honest advice and local insights—we’re here to help you make smart moves with confidence.