The data is in. Properties eligible for the scheme have risen nearly twice as fast as higher-priced homes since it was introduced.
New analysis from property research giant Cotality shows that since October last year, properties with an estimated value below the 5% Deposit Scheme price caps have recorded stronger growth than higher-priced homes.
Over the first six months of the expanded scheme, homes with a value under the price caps have increased in value by 6.7 per cent compared with a 3.6 per cent rise in value for properties with an estimated value above the price caps.
Source: Cotality
Beyond the numbers
According to Cotality, several factors may explain the stronger growth at lower price points:
- Demand brought forward: 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.
- Serviceability constraints: With higher home values and elevated interest rates, serviceability constraints are likely to be pushing demand toward lower-priced, more affordable properties.
- Investor activity: Investor activity has increased in the lower price segment, competing with first-home buyers and mainstream demand. Investors accounted for 40 per cent of mortgage demand at the end of last year – well above the decade average, where they typically make up around one-third of mortgage demand.
Sydney had the largest value growth differential where homes with a value under the cap are up 4.1 per cent over the past six months, while those above the cap have fallen by 1.1 per cent.
Across Australia, 81 of the 88 city and regional markets have shown a stronger growth rate for properties with a value under the price caps.
First home options
Overall, it is likely the first home buyer deposit guarantee will gradually lose its stimulatory power, with more homes exceeding the price thresholds and a growing share of prospective buyers running into a finance hurdle that is set to rise further.
Demand from first time buyers looking to purchase a house is likely to be skewed towards the outer fringes of the capital cities or regional markets where price points are lower.
More affordable and widespread options are available to first home buyers across the unit market, which is likely to become an increasingly popular option for budget conscious buyers looking to participate in the deposit guarantee scheme.
