Impact of the First Home Buyers Scheme on Property Prices

Understanding the First Home Buyers Scheme

The First Home Buyers Scheme is a government initiative designed to make homeownership more accessible by offering financial assistance to first-time buyers. This scheme typically includes benefits such as grants, reduced deposit requirements, and tax incentives. By reducing the financial barriers to entry, the scheme aims to encourage more individuals to step onto the property ladder.

While the scheme has been applauded for its intentions, it has also sparked debates about its long-term impact on the housing market. One of the most significant areas of concern is the potential effect on property prices.

Rising Demand and Property Prices

One of the immediate impacts of the First Home Buyers Scheme is an increase in demand for properties. As more people are financially able to purchase homes, the demand naturally rises. This surge in demand can lead to increased property prices, especially in areas where the supply of homes is limited.

There is ongoing debate about the scheme’s precise contribution to rising house prices.

Treasury modelling suggests the expanded scheme may increase national house prices by approximately 0.6% over six years, a relatively modest impact when compared with factors such as population growth, interest rates, and housing supply constraints.

In many cases, this increased demand has resulted in competitive bidding, driving prices even higher. Consequently, while the scheme helps first-time buyers, it may inadvertently make it more challenging for others to enter the market.

Independent modelling and industry analysis have estimated price increases of 3.5% to 6.6% in the first year, with some localised markets potentially experiencing even higher growth.

Broader Affordability Outcomes

Despite improved access for individual buyers, overall affordability has continued to deteriorate:

Analysis by major advisory firms indicates the proportion of homes affordable to the average first-home buyer has fallen from around 30% in 2019–20 to approximately 12% by late 2025.
This decline underscores a key criticism of demand-side incentives: without corresponding increases in housing supply, policies designed to help buyers can inadvertently contribute to higher prices.

Balancing Benefits and Challenges

The First Home Buyers Scheme undoubtedly provides numerous benefits, such as increased homeownership rates and a boost to the housing industry. However, these benefits must be weighed against the challenges, particularly the risk of inflating property prices.

To mitigate these effects, some experts suggest implementing complementary measures, such as increasing housing supply or offering targeted schemes for specific regions. These strategies could help balance the market and ensure that the scheme's benefits are more evenly distributed.

Long-Term Market Implications

The long-term impact of the First Home Buyers Scheme on property prices remains a topic of debate. Some analysts argue that the initial surge in prices may stabilize over time as the market adjusts. Others believe that unless supply constraints are addressed, prices will continue to rise, exacerbating affordability issues.

On top of this, market-wide affordability has continued to decline, driven by structural supply shortages.