Home prices climb as government scheme fuels market momentum | The Business | ABC NEWS

National home values gained for the eighth month in a row as a mismatch in supply and demand continues. National property prices climbed 0.8 per cent in September — the strongest monthly gain since October 2023 — marking the eighth consecutive rise, according to property research firm Cotality. The national median home value is now $857,280. Darwin led the monthly gains, surging 1.7 per cent in September, followed by Perth, Brisbane, Adelaide, Sydney, Canberra, Melbourne and Hobart. Interest rate cuts through 2025 and real wage growth have boosted borrowing capacity, while listings remain low. "There are a couple of other factors playing in at the moment, which is this increase in confidence we've seen for consumers throughout the year and maybe a little bit of anticipated increase in activity from the expanded First Home Guarantee," Cotality head of research Eliza Owen said.

From October 1, the federal government's Home Guarantee Scheme has no income or place limits and higher price caps. Buyers can purchase with as little as a 5 per cent deposit, avoiding lenders' mortgage insurance (LMI). The federal government acts as guarantor for the remainder of the 20 per cent deposit. Experts warn the expanded scheme will fuel price growth. In Sydney, for example, first home buyers will be able to buy a home for up to $1.5 million, when previously the price cap was $900,000. Treasury modelling suggests the policy will lift values by just 0.5 per cent over six years, but other analysts are sceptical. "What that's likely to do is add demand into a red-hot property market. Without a correlating increase in supply, prices are likely to go up even further, particularly fuelled by the three cash rate cuts we've already had this year," Canstar's director of data insights, Sally Tindall, said. Cotality's analysis shows a 5 per cent deposit means taking on a 95 per cent loan-to-value mortgage, costing hundreds of thousands more in interest over 30 years compared to a 20 per cent deposit. Sydney mortgage broker Nathaniel Truong said higher-earning first-home buyers, previously locked out by income caps, are now flooding into the market. With first-home buyers taking on bigger loans and more interest, banks are competing hard. Canstar research shows participating lenders are offering lower variable rates to scheme participants than to other borrowers.
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