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Entry-level homes outperform as first home buyer scheme stokes competition
Since its launch, the first home buyer scheme has driven stronger demand and faster price growth for lower-priced properties nationwide, outpacing higher-priced homes across most regions, new data showed.
Recent data from Cotality found that property prices below the First Home Buyer scheme grew by 3.6 per cent over the December quarter, faster than dwellings above the cap, which recorded a 2.4 per cent increase.
Cotality research director Tim Lawless said the scheme had sharpened demand at lower price points, with under-cap markets outperforming across almost nine in 10 regions
“We’re seeing a clear shift in momentum, with buyers increasingly targeting homes that fall under the new price caps – especially in Sydney, where the value gap is most pronounced,” Lawless said.
Across the nation, Cotality found that 89 per cent of regions recorded significantly higher growth rates for homes below the caps than for those above.
“This trend was already visible before the scheme’s official start on 1 October, suggesting some buyers acted early to secure properties before competition increased.”
Lawless said the anticipated acceleration in demand prior to the scheme’s expansion could be a driving factor in the surging prices, with some buyers rushing to purchase before additional competition entered the market.
Additionally, Lawless said that increased investor interest in more ‘affordable’ properties had placed them in direct competition with first home buyers and mainstream demand, pushing prices upward.
“Anticipation of increased competition and price pressure after the scheme’s launch has likely brought forward demand from those who didn’t necessarily need to rely on the deposit guarantee,” he said.
Lawless said that, in addition to the first home buyer scheme, investor activity, serviceability constraints, and overall demand could have contributed to the strong growth seen in lower-priced properties.
Market insights
The data found that the pattern of stronger growth below the cap was consistent across almost all capital markets, with Canberra being the only exception.
Properties in Perth led the way in the December quarter for price growth, with an increase of 8.4 per cent below the cap and 7.3 per cent for dwellings above.
Brisbane and Darwin recorded the next-largest jumps in value at the lower price point, rising by 6.5 and 6.1 per cent, respectively.
Sydney experienced the largest price growth differential over the quarter, with properties under the cap rising by 2.3 per cent while those above fell by 0.1 per cent.
Melbourne experienced the smallest increase over the quarter, with properties eligible for the scheme rising by 1.4 per cent, while the more expensive properties rose by 0.3 per cent.
Canberra was the only city to experience the trend in reverse, with property above the cap increasing by 2.6 per cent, while those below rose by 1.9 per cent.
In regional markets, Western Australia was the standout, with values rising by 6.4 per cent for lower-priced properties and 5.7 per cent for higher-priced dwellings.
Regional Queensland and Tasmania recorded the next-largest increases in value, whereas regional New South Wales recorded the smallest.
“Overall, the expanded deposit guarantee appears to have amplified demand for lower-priced homes, contributing to faster growth in this segment compared to higher-priced properties,” Lawless concluded.