Govertment move to fuel price ‘explosion’ in key western suburbs

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From October, typical houses in a lot more suburbs will become accessible for first-home buyers with small deposits.

Interest rate cuts combined with the newly announced expansion of first-home buyer incentives could ignite another round of runaway price growth in some of Sydney’s most affordable areas.

New data shows an average priced house in nearly 250 more Sydney suburbs will become accessible for buyers with 5 per cent deposits when the federal government expands its First Home Guarantee Scheme in October.

First-home buyers were previously only eligible for the scheme if buying properties below $900,000 but the price caps will be lifted to $1.5 million, while previous income limits have been removed.

An average priced house had been eligible for the scheme in just under 50 Sydney suburbs before the changes, but this will increase to nearly 300 suburbs in October, analysis of PropTrack data showed.

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Higher price caps will also mean the average unit in 137 suburbs will become accessible for first-home buyers using the scheme, with the expanded eligibility expected to drive significant buying activity.

There were previously 250 suburbs where the median priced unit was eligible for the scheme but this will rise to 390 when the changes take effect in October – close to 95 per cent of the unit market.

First-home buyers accessing the scheme are able to buy without incurring lenders mortgage insurance that would normally be charged for buyers with small deposits.

Those insurance costs can add $20,000-$30,000 to the upfront cost of homes bought at $900,000 to $1.5 million, which would be additional to other charges like stamp duty.

Scheme changes coupled with already rising demand from buyers capitalising on three interest rate cuts this year – all at a time of dire housing supply levels – could create a powder keg, experts said.

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Auction competition has been rising since the July rate cut. Picture: Sam Ruttyn

Modelling from Shore Financial, released just prior to the announcement this week of the fast tracking and expansion of the guarantee scheme, showed prices were already on track for growth.

Outer suburbs such as Mt Druitt, Whalan, Eschol Park and Ambarvale were forecast price growth of at least 5 per cent, but potentially over 10 per cent, in the next six months alone, the data showed.

Expansion of the guarantee scheme could lift those forecasts.

Other areas projected to see strong growth were Dee Why, Wheeler Heights and North Narrabeen, on the northern beaches, and Shire suburbs Miranda and Kurnell.

Hotspotting property analyst Terry Ryder said the scheme would be welcome news for many first-home buyers, who would find it easier to buy, but it would also “add fuel to the fire” of already rising prices.

The Daily Telegraph Friday 22 August 2025
Home Buyer In Church Point
Picture Thomas Lisson

Tina and Brendan Netto, with their kids, recently bought a first home on Scotland Island. Picture: Thomas Lisson

“It will exacerbate demand at a time of supply shortages,” he said.

“Affordability will become worse because the scheme doesn’t address the core problem which is that not enough homes are being built because the price of construction has become hideously expensive.”

Mr Ryder added that the scheme was another example of politicians creating demand-side fixes that didn’t solve structural supply issues.

Demand would be particularly strong for units and townhouses as greater numbers of these properties were covered by the scheme in Sydney, Mr Ryder said.

Mortgage Choice broker James Algar said the changes would be a significant price driver because there were a lot of buyers waiting in the wings with little in deposit but high incomes.

“Removing income caps will be a major change,” he said, referencing the removal of previous limits in the scheme to couples earning less than $200,000 a year and singles on less than $125,000.

“We’ve had a lot of conversations with people who can afford a large mortgage they just don’t have much savings. Taking the previous limit away means all those earners will come into the market.

“Inquiries were already rising because interest rates were falling. Competition among buyers will get a lot stronger.”

Finch Financial CEO Julian Finch said more buyers, armed with more money, was “perfect conditions for a price “boom”.

“The reality is that more buyers with potentially unlimited incomes will now flood into the same price brackets, creating intense competition,” he said.

“We are going to see the property market explode and prices soar … this scheme doesn’t just create more buyers, it injects more money supply directly into a market already constrained by limited stock.”

Recent first-home buyers had observed that the market was competitive even before this week’s scheme changes – largely due to interest rate cuts.

Mortgage Choice broker James Algar said there were many buyers with high income, but low deposits, who may capitalise on the scheme. Picture: Britta Campion

Tina Netto, with partner Brendan, recently bought a house in northern beaches suburb Scotland Island, her first home, and said it took them more than a year to simply find a home they liked.

“In the beginning we couldn’t find anything we could afford but it helped when we moved our search to Scotland Island, which was a bit cheaper,” she said. “If we had stayed looking where we used to live it would have been too competitive.”