First Home Fever: How Election Promises Stack Up for Aussie Property Pros

With the federal election looming, both major parties have unveiled policies aimed at addressing the perennial issue of housing affordability, particularly for first-home buyers. These promises have significant implications for the Australian property market, influencing demand, supply, and ultimately, the financial landscape for property professionals across the country.

Policy Breakdown: A Clash of Approaches

Labor and the Coalition presented their housing policies at their respective campaign launches, both focusing on easing the burden for young voters struggling to enter the property market amidst rising prices and limited housing stock.

Labor’s Deposit Guarantee Scheme

Labor is proposing an expanded First Home Buyers Guarantee, allowing buyers to purchase a home with a deposit as low as 5%. The government would guarantee the remaining portion typically required for lender’s mortgage insurance (LMI). While a similar scheme already exists, capped by income and number of participants, Labor’s proposal removes these limitations, focusing instead on price caps relative to regional averages. This expanded scheme could significantly increase demand, particularly in major metropolitan areas. The potential impact on house prices needs careful consideration, as boosted demand without corresponding supply increases can fuel inflation. A $10 billion commitment to build 100,000 homes exclusively for first-home buyers as part of a larger 1.2 million homes target seeks to address this.

Coalition’s Mortgage Interest Tax Deductions

The Coalition is proposing a scheme where first-home buyers of new *build* homes can deduct mortgage interest payments on loans up to $650,000 from their taxable income for a period of five years. There are no property price limits, but the scheme is means-tested, targeting singles with incomes up to $175,000 and couples up to $250,000. Unlike Labor’s proposal, this scheme is limited to new builds. The Coalition also proposes a $5 billion infrastructure fund to unlock land supply and facilitate the construction of 500,000 new homes. This policy aims to stimulate the construction sector and boost housing supply, potentially moderating price growth. The focus on new builds could also lead to increased investment in property development and construction materials and services.

Expert Analysis: Supply, Demand, and Financial Market Repercussions

Ray White Group chief economist Nerida Conisbee highlights the differing approaches, stating that Labor’s plan directly addresses the deposit hurdle, removing the immediate need for LMI. “[The Labor scheme] removes the need for lenders’ mortgage insurance, potentially saving first-home buyers tens of thousands of dollars upfront. This would apply to both established and new homes, with price caps still in place.”

Conisbee notes that the Coalition’s policy targets ongoing affordability through tax deductions, specifically for new properties. “[The Coalition’s plan] focuses on reducing ongoing mortgage costs through tax deductions, but only for newly built properties,” incentivising new construction.

Inflationary Concerns and Interest Rate Sensitivity

The potential impact on inflation is a key concern. Increased demand fueled by easier access to finance (Labor’s scheme) could push house prices higher, particularly if supply doesn’t keep pace. This inflationary pressure could, in turn, influence the Reserve Bank of Australia’s (RBA) decisions regarding interest rates. Higher interest rates would impact all mortgage holders, potentially offsetting the benefits of either party’s policies, especially for those with larger mortgages taken out in a rising price environment.

Financial Market Implications

These proposed policies also ripple through financial markets. Increased mortgage demand could lead to higher demand for mortgage-backed securities (MBS), potentially impacting yields. The Coalition’s focus on new builds could stimulate investment in construction-related stocks and potentially increase demand for infrastructure bonds. However, economist Saul Eslake expressed strong scepticism, stating, “[Buyers] will take out bigger mortgages… So house prices will go up – as they always do.” Eslake fears these policies will push house prices up even higher. He argues *”any policy that allowed Australians to spend more on housing than they otherwise would have been able to would lead to more expensive housing and fewer people entering the market.”*

The impact on the Australian financial system hinges on the RBA’s response to any inflationary pressures these policies may generate. Prudent risk management by lenders will also be crucial to avoid excessive lending and potential stress on the housing market.

Different Perspectives and Potential Outcomes

While designed to assist first-home buyers, both policies face scrutiny regarding their potential unintended consequences. Supply-side bottlenecks, including planning approvals and construction costs, remain a significant challenge. If these are not addressed adequately, any boost in demand could simply drive up prices, benefiting existing property owners more than new entrants.

The effectiveness and long-term impact of these policies will depend on various factors, including the overall economic climate, interest rate movements, and the ability of the construction industry to meet increased demand. Property professionals need to closely monitor these developments to adapt their strategies and advise their clients accordingly.

Furthermore, any changes to negative gearing or capital gains tax, should they be considered by either party post-election, would significantly alter the investment landscape and merit close scrutiny.

This is a dynamic situation, and ongoing analysis of financial market reports and economic indicators will be essential for navigating the potential impacts these proposed policies may have on the Australian property market.

Source: The New Daily article originally appeared on View.com.au. Ray White Group Market Reports; Sky News Australia; Independent Economic Analysis.

This article is based on a report from www.thenewdaily.com.au titled “Major parties woo first-time buyers – their policies explained”. You can find the original article here: https://www.thenewdaily.com.au/finance/property/2025/04/15/first-home-buyer-election-2025