The core issue gripping Australia's housing market right now is the rapid acceleration in property prices, raising alarms about affordability and economic stability. But here’s where it gets controversial… a government scheme designed to help first-time buyers might actually be fueling the very price surges it aims to address. Want to understand how a five percent deposit scheme could be inadvertently boosting house prices? Keep reading.
In October 2025, national property values soared by 1.1%, marking the fastest monthly increase in more than two years. According to property analytics firm Cotality, this sudden jump appears closely linked to the recent expansion of Labor’s five per cent deposit scheme. Just a month prior, the scheme was broadened in a move that allows young Australians to buy homes with as little as a five percent deposit.
Gigi Foster, an economist from UNSW, voiced strong concerns on SkyNews.com.au, asserting that the design of this deposit scheme makes rising prices almost unavoidable. She pointed out several factors—unlimited access, higher property price caps, and the absence of income restrictions—that organizations like Housing Australia have promoted. These elements, she argues, primarily serve to increase demand without any corresponding boost in housing supply.
Foster emphasizes that nothing about these policy features suggests they will help reduce house prices. From her economic perspective, they seem to actively expand demand, which, in a market with limited supply, naturally leads to higher prices. And indeed, housing supply remains tight, with some local councils falling short of their housing approval targets by more than 70%. This imbalance between demand and supply makes price increases almost inevitable.
She warns that, without significant new housing development to meet rising demand, prices will continue to escalate. Her blunt conclusion is that the policy modifications appear intentionally or unintentionally aimed at pushing up property values. She adds, perhaps somewhat cynically, that the government seems either unaware of basic economic concepts or simply uninterested in addressing affordability concerns for Australians.
Housing Minister Clare O’Neil did not respond to inquiries about these issues, but Prime Minister Anthony Albanese has openly acknowledged that the scheme could exert upward pressure on house prices. Meanwhile, opposition figures like Shadow Housing Minister Andrew Bragg have strongly criticized the scheme’s effects, arguing that it has made home ownership less affordable. Bragg highlighted that the surge of 1.2% in prices over a single month is evidence that changing the deposit requirements has directly contributed to higher prices.
Across Australia’s capital cities, the impact was clear: Perth experienced the largest monthly rise at 1.9%, followed by Brisbane at 1.8%. Sydney, with its median house price now hitting $1.25 million, saw a more modest increase of 0.7%. Over the year to October 2025, dwelling values across all capitals increased by 5.6%, averaging a median of $959,526, while the national median house price, combining both capital and regional markets, stood at approximately $872,538.
These increases are driven by multiple factors, including the ongoing shortfall in new housing supply—an issue that exacerbates competitiveness and price escalation. The critical question remains: Are these policies helping Australians buy homes, or are they simply inflating a market that’s already out of reach? Should policymakers focus more on increasing housing stock instead of tweaking deposit schemes?
Now, I ask you—do you believe the government’s approach effectively balances support for homebuyers while maintaining market stability? Or is it fundamentally flawed, risking creating a housing bubble? Share your thoughts below; your perspective could spark an important debate.
