This Policy Change Could Trigger The Next Property Boom! But There's a Trap! [APS100]

This Monday set the whole Australian property world on fire. The government announced sweeping rule changes. How shocking are they? I’m not exaggerating: this could rewrite the market’s playbook. From October 1, with just a $75,000 deposit, you could buy a $1.5 million Sydney home—and skip tens of thousands in lenders’ mortgage insurance (LMI). Think I’m kidding? It’s real. And bringing the start date forward wasn’t the only surprise—there are four unprecedented changes. They’ll thrill countless first-home buyers and could trigger a market shake-up. But hidden behind the excitement is a trap big enough to ruin families. At the same time, it opens a once-in-a-lifetime window for savvy investors.

In today’s episode, I’ll unpack this new policy, how it could shape prices over the next 12–18 months, why we’re edging toward a "1% deposit era", and what first-home buyers and investors must do to seize the upside and avoid the risks.

Home Guarantee Scheme

This Monday, the Australian Government supercharged the Home Guarantee Scheme (HGS): the start date is brought forward to 1 October this year, and the rules are significantly relaxed. So what exactly is HGS?

Imagine a $1,000,000 home. Normally you’d put down 20% ($200,000) and borrow $800,000. Or you could try a 5% deposit ($50,000) and borrow 95% ($950,000)—but then you must buy Lenders’ Mortgage Insurance (LMI) because the bank worries you might miss repayments on a high-LVR loan. On a $950,000 loan, LMI is roughly $44,000. Exact costs vary by lender, insurer and timing, and you can either pay cash or capitalise it into the loan. Either way, it’s huge—almost as much as the $50k deposit. LMI is a major barrier for buyers with less than 20% deposit.

HGS is designed to solve that. You still pay 5%, the bank still lends 95%, but the government guarantees 15% of the price. If you fall behind, the government covers the lender’s risk, so the bank doesn’t require LMI. The government is acting like the insurer—not taking a 15% equity stake or lending you that portion. You still own 100%, make repayments to the bank, and can sell like any normal home (unlike some state schemes that restrict sales for two years). There are eligibility rules when applying though.

Previously, HGS had three sub-schemes with different minimum deposits (as low as 2%). Because most people use the First Home Guarantee, and the Regional First Home Buyer Guarantee will be folded into it, the new policy now has two:

1.First Home Guarantee – minimum 5% deposit

2.Family Home Guarantee – minimum 2%, for specific family circumstances

When Labour campaigned in the election, HGS was a flagship promise: help first-home buyers use smaller deposits, borrow more, and afford higher-priced homes. The policy did alright, but this upgrade changes the game.

The policy upgrade has four big changes. 

1.No cap on places. The old 35,000 annual places policy is gone, it's uncapped now. The government expects around 20,000 more applications in the first year.

2.No income cap. The old limits—$125k income per year for single or $200k a couple—are removed. In theory, even someone earning $1m can apply.

3.Higher price caps. Sydney goes from $900k to $1.5m; Melbourne from $800k to $950k; Brisbane: $700k to $1m. The price cap in regional areas also rises sharply. The new price cap can now allow buyers to purchase a decent entry-level standalone house.

4.Eligibility basics. Must be an Australian citizen or PR, a first-home buyer, purchasing new or established to live in, and no Australian property owned in the past 10 years.

Why bring this forward now?

1.Affordability has worsened. Fast-rising prices made the old caps unworkable—especially in big cities. Saving a deposit takes longer; renters struggle to transition to owning.

2.Fairness. High earners who still can’t buy a first home were excluded; now they’re included.

3.Demand stimulus. Scrapping income and place caps and lifting price limits allows buyers to buy more expensive homes. This will stimulate demand and thus the property prices will increase.

4.Delivering promises. It signals the government is acting on election commitments.

Whatever the intent, what we care about most is how this will affect the first-home buyers, the market, prices, and investors.

If you have any questions about property investment, please book a free 15-minute discovery call on our website. If you want a team offering one-stop service to help you build a property investment portfolio, achieve financial freedom and retire early, join our VISION Membership by booking a 30-minute obligation-free discovery session to start with. Or to keep it simple, our data-driven buyer's agency service can help. We buy and manage properties for our clients anywhere in Australia. Links to the service are in the description below.

Impact on First-Time Home Buyers

For first home buyers, this policy change brings enormous benefits. No salary caps, no spot limits, increased price thresholds, 2% to 5% deposit, no mortgage insurance required, and the government doesn't hold equity, repayment methods unchanged, and no selling restrictions whatsoever. From every perspective, there are only advantages. People who previously couldn't buy because prices exceeded limits can finally raise their budgets and purchase properties. For many first home buyers, this is truly a lifesaver. How big is the difference? It's the difference between being able to buy and not at all.

However, removing salary caps has actually given wealthy second-generation buyers a green light for their first purchases. They might afford even higher-priced properties, but why not use a 5% deposit to gamble on a detached house? This is solid 20-times leverage - even stock speculation doesn't offer this level of excitement. Especially in rising markets, if these wealthy kids can properly utilise the upgraded first-home buyer policy, they've definitely caught an excellent money-making opportunity. The future policy users won't only be first-time buyers in need, but anyone who qualifies and wants to profit. While actually helping people buy their first homes, this also stimulates property investment. The government expects 20,000 additional applications for the first year - my guess is that the actual number will be much larger.

The other side of 5% deposit is 95% loans - buyers only own 5% of the house while banks own the other 95%. If house prices rise, everything's fine, but if prices drop, problems become serious. Australian property declining 5% in one year actually isn't uncommon. If future interest rates enter an upward cycle, bank rates rise, monthly payments increase, buyers feel too much pressure wanting to sell, but houses happen to be dropping in value. Even when selling, after deducting purchase, sale, and holding costs, losing money is for sure. In fact, the owner will not only lose money, but also pay extra cash to the bank for the shortfall, because after the sale, they can't even repay the entire loan amount. If a bunch of people who only paid 2% or 5% deposit join the selling crowd, entry-level markets will experience massive fluctuations. Then the government will have to take on guarantor responsibilities, stepping up to repay banks for buyers. In any case, it will be market turbulence. During market declines, buyers don't own 5% of houses - they own 100% of the debt.

Therefore, when buying houses, you absolutely cannot focus only on living comfort while ignoring investment attributes. If you only care about comfortable living, when markets decline too much, negative equity problems will emerge. But if when purchasing your first house you make buying decisions based on investment profits and long-term stable appreciation, buyers' personal financial situations will be much more stable in the future, avoiding forced house sales.

Impact on the Property Market

When the government announced this policy, to be honest, I was shocked. Why? Because my first reaction was: entry-level property prices are about to rise again. With such a low deposit, and no income or quota restrictions, from October 1st a huge wave of buyers will rush into the market. Entry-level homes, already in short supply, will become even scarcer. Auction clearance rates will surge.

At the same time, two clear trends will emerge. In big cities, entry-level homes will rise much faster, while price growth in outer areas will be more limited. Why? Because this time, the price caps in capital cities have been lifted much higher. For example, in Sydney, the cap jumped from $900,000 to $1.5 million, and in Brisbane from $700,000 to $1 million. Other regions saw smaller increases. My guess is that in the next 12 to 18 months, entry-level homes in capital cities will outpace those in surrounding areas, percentage-wise.

The government is essentially trading long-term, faster price growth for short-term affordability for a small group of buyers. First-home buyers who qualify, together with property investors targeting entry-level homes, will flood in. More buyers push up prices, rising prices attract even more buyers. This cycle only stops under two conditions: either the average entry-level price rises above the cap, or a new rate-hiking cycle begins. Neither seems likely in the next 12 to 18 months.

So what happens when Sydney’s entry-level average hits $1.5 million? Wages will never rise that quickly, let alone savings. By then, if the government wants to help first-home buyers again, it will need to introduce even bigger subsidies—using taxpayers’ money or pumping more credit into the system. In other words, we may be heading straight toward an era of just 1% deposits.

How Should Buyers and Investors Respond?

If you’re a first-home buyer and you qualify, don’t hesitate—buy now. Aim as close as you can to the cap, so you can secure a better property. With only a 5% deposit, the cash outlay isn’t heavy. But make sure you choose based on investment standards, not just comfort. That way, your property can withstand future downturns, and you won’t fall into negative equity or be forced to sell. Which means: avoid high-density apartments, properties with no scarcity, or suburbs with huge apartment development pipelines. They rise slowly and, once the market turns, everyone sells at once, forcing you to slash prices. If you buy only for lifestyle, your home will likely rise little—or rise very slowly.

For property investors, if your budget allows, look at entry-level homes in major cities. They’ll rise faster than outer areas, though, of course, there will be exceptions. The key is timing: buy before October 1st. After that, prices will accelerate, your entry cost will soar, and your returns will shrink.

And if you’re unsure where or what to buy, come talk to us at AusPropertyStrategy. Our VISION Members typically go from strategy setting, tax planning, entity setup, loan approval, all the way to securing the right property in just two weeks. In today’s race-against-time market, speed is everything.

Watch the video version of the blog on YouTube.

15 Minutes Free Consultation (Limited-Time Free Offer)

If you have any questions about Australian real estate, we invite you to use our 15 Minutes Free Consultation service. Once you have filled in the form, a professional property investment strategist will be in touch with you. They will assess your needs and provide fundamental advice. This service is designed to help answer general property-related queries. BOOK NOW.

VISION Membership

Our Flagship Service: VISION Membership. Your One-Stop Property Investment Manager – Build a Tailored Portfolio and Achieve Financial Freedom

Whether you're an employee, a professional, a business owner or even a new migrant, everyone has a financial goal for the future. The VISION Membership is designed to solve all the pain points in your Australian property investment journey through one single, comprehensive service.

By analysing your current financial situation and long-term goals, we'll tailor a property investment plan just for you. Our team will match you with the ideal mortgage structure, tax strategies, wealth planning, and legal support, empowering you to go further, faster, and smarter on your path to financial freedom.

VISION Membership is perfect for busy individuals who want a professional team to create, expand and manage their Australian investment portfolio. If you're looking for a dedicated team, including real estate investment experts, mortgage brokers, accountants, financial planners, and property solicitors, VISION Membership is your ideal solution.

Start with an obligation-free 30-minute discovery session on Zoom. BOOK NOW.

VISION Buyer’s Agent

No time for inspections? Tired of dealing with pushy selling agents? Unsure how much to offer or feeling nervous about auctions? Worried about buying the wrong property? If any of these sound like you, AusPropertyStrategy's Australia-wide VISION Buyer's Agent Service is here to help.

We provide end-to-end support to help you build an optimised property portfolio and achieve your financial goals—whether you're investing interstate, refinancing, or planning post-settlement leasing or resale. Our services cover everything from suburb research and property selection, to price negotiation, auction bidding, and post-settlement support.

Start with an obligation-free 30-minute discovery session on Zoom. BOOK NOW.

real estate australia,real estate investing,australian property,australian housing market,australian economy,australian property investment,australian property market,buying property,australian real estate,mortgage brokers brisbane,first home buyer,Australian Real Estate,Australian Real Estate Investment,Australian Property Investment,Real Estate Investment,Property Investment,Property Investment Australia,Passive Income,Positive Cash Flow,Australia Real Estate Investing,Australian Real Estate Investors,Australian Property Investors,Vision Wealth Mentors,Vision Real Estate Investors Australia,financial freedom, freedom through property investment,real estate investors,property investment,passive income,positive cash flow,real estate course,real estate courses,real estate training,australian property market,property investment brisbane,property investment sydney,melbourne property market,investing in brisbane,investing in melbourne,how to invest in property,buying properties,start investing in property,property investment strategy,how to buy investment property,property investing tips,best suburbs to invest in sydney,locations real estate,prime location,property growth by suburb,capital growth suburbs