The Labor government’s landslide election victory has ensured its signature housing policy that encourages first home buyers into the property market through a 5 per cent deposit scheme will be rolled out.
Amidst concerns the policy due to take effect on the first day of 2026 could fuel further property price hikes, first home buyers with a five per cent deposit would be able to avoid lenders mortgage insurance (LMI), which costs about $23,000 on average.
Under the scheme, 15 per cent of the property’s value would be guaranteed by the Federal Government. There will be no income caps or limits on purchase price.
The Albanese Government has acknowledged that for the program to avoid generating counterproductive property price rises additional policies must improve the dire housing supply shortfall too.
Labor pledged to committed $10 billion to partner with state developers and industry to construct up to 100,000 new homes exclusively for first homebuyers over the next eight years. The first of the 100,000 homes will be ready from 2027 if all goes to plan.
“We need to give people a fair crack, particularly young people,” Mr Albanese said on the campaign trail.
“But we have a comprehensive $43 billion Homes for Australia plan, making sure, whether it’s about increased social housing, increased private rentals or increased home ownership as well, through our Help to Buy scheme, that will all be of assistance,” he said.
“The key, of course, is supply and that’s why we have offered a plan to increase the supply of housing.”
Property price fuel or fix
Property market experts and organisations were divided about the prospects of the government’s policies achieving their goals.
The Real Estate Institute of Australia (REIA) said, “Labor’s housing policies reflect the need for a bold yet balanced approach that aligns with many aspects of REIA’s A Home for All Australians Election Plan.”
Leanne Pilkington, President of the peak housing body, said the election has underscored the critical importance of stable and practical housing policy.
“Labor’s return to office comes with a strong mandate to tackle affordability and increase home ownership across the country,” Ms Pilkington said.
“We welcome Labor’s emphasis on supply and affordability.
“Support for first home buyers is a vital step toward bridging the generational divide in housing access,” Ms Pilkington said.
“Most of the housing supply rubber hits the road with state and local governments, but the Federal Government does now have some levers to pull.”
– Matt Bell, Oliver Hume
She added that maintaining current negative gearing and capital gains tax arrangements would ensure investor confidence and stability in the rental market.
“As the Government prepares to tackle the goal of delivering 1.2 million new homes, the success will also depend on addressing structural challenges including planning and zoning delays, critical labour shortages, and high building costs.”
Nerida Conisbee, Chief Economist for the Ray White Group, was forthright in saying the unintended side effects of the government’s signature deposit policy could backfire.
“Australia’s housing market is poised for significant change under an administration that has placed housing affordability at the centre of its policy platform.
“The Albanese government’s comprehensive housing package, while aimed at improving accessibility for first home buyers, is likely to drive prices higher in the near term before supply-side measures can take effect.”
Under the expanded program, approximately 80,000 Australians are expected to enter the property market annually, up from the current 50,000 who access the income-capped version.
“By removing the substantial barrier of lenders’ mortgage insurance and the need for a 20 per cent deposit, the policy dramatically lowers the entry threshold to homeownership,” Ms Conisbee said.
“For the typical Sydney property, this could mean the difference between needing a $200,000 deposit and requiring just $50,000—potentially saving years of saving time for aspiring homeowners.”
But she cited independent government research as pointing to a likelihood of price growth in the short term.
“The Productivity Commission’s research on first home buyer incentives consistently shows that measures increasing purchasing power, without commensurate supply increases, typically lead to price escalation in targeted market segments.
“With more buyers able to enter the market simultaneously and competing for the existing housing stock, upward price pressure becomes inevitable.”
Time for federal action
Demand-side policies without effective supply delivery would do little to turn around the housing crisis, according to Matt Bell, Chief Economist at Oliver Hume.
“We’re already looking down the barrel of missing the National Housing Accord five-year target of 1.2 million homes by more than 400,000.
“Funding for 100,000 new houses for first home buyers to be delivered over eight years, $54 million for modular and prefabricated home construction industry development, construction apprentice cash bonuses and priority hiring incentives; the combined effect of these policies with the 30,000 new social and affordable homes already in train will barely touch the sides of the housing pipeline in the next three to five years, let alone over the next decade,” Mr Bell said.
“Most of the housing supply rubber hits the road with state and local governments, but the Federal Government does have some levers to pull and now that Labor is returned with such a strong mandate for these policies, it might consider supplementing them with some additional initiatives that have the potential to move the dial meaningfully on the supply side.”
He argued the government could consider matching the $5 billion the Coalition promised to fund housing friendly infrastructure as probably the most direct and immediate way that the Federal government can impact delivery of new housing.
Providing financial incentives for the states and territories to reduce planning approval times and accelerate zoning for new housing – for both infill and greenfield land – would also be helpful, he added.
Build-to-rent looks more attractive
Beyond residential property, Knight Frank’s Chief Economist Ben Burston said the election outcome doesn’t materially change the outlook for the commercial sector.
“The impact of tariffs and the prospect of interest rate cuts are more meaningful, however, it does provide clarity over the direction of housing policy and will be supportive for the fast-growing living sectors,” he said.
“For build-to-rent (BTR), it means that the recently passed managed investment trust (MIT) reforms will remain in place, which will reassure major offshore investors that the government supports their ongoing investment in the sector.
“For purpose-built student accommodation, both sides of politics had proposed reducing the number of international students, but the government has foreshadowed a smaller reduction.”
The passing of MIT legislation in December significantly reduced the tax burden on BTR developments.
