The unintended consequences of housing assistance schemes

Herron Todd White has just released a comprehensive report examining government first homebuyer assistance schemes across Australia.

The timing of this analysis coincides with the expansion of the federal Home Guarantee Scheme on 1 October, which removes place limits and income caps while increasing price thresholds in most regions.

These policy changes represent a fundamental shift in how government supports housing accessibility. We’ve moved well beyond simple grants to arrangements where governments now act as mortgage insurers and, in some cases, direct equity partners in residential property. While the social intent behind these schemes is commendable, they introduce financial exposures that demand rigorous risk management.

Our report identifies several concerning dynamics. Historically, large-scale first home buyer incentives have stimulated purchasing activity while simultaneously driving price increases. The data from both the Global Financial Crisis and COVID-19 periods demonstrate this pattern clearly. When government assistance expands, prices tend to rise, necessitating even greater support for subsequent cohorts of buyers.

More critically, the price caps inherent in most schemes funnel purchasers toward property types and locations that historically underperform the broader market. These property types are also more susceptible to negative equity during market corrections.

With governments now financially invested in individual properties through shared equity arrangements and loan guarantees, proper due diligence becomes essential. Yet current frameworks don’t mandate the level of asset scrutiny this exposure warrants. Our key recommendation is straightforward: any property purchased under these schemes should require a full, in-person valuation at the time of purchase and annually thereafter. This isn’t just prudent risk management for government; it also protects first home buyers from purchasing unsuitable properties.

The broader question these schemes raise is whether we’re genuinely addressing housing affordability or simply facilitating access to finance at current price levels. Historical evidence suggests the latter.

In this vein, this current edition of Month In Review examines first homebuyer markets across the country, providing localised insights about what buyers can realistically purchase within this sector. The analysis reinforces the critical importance of strategic asset selection, particularly when operating within constrained budgets.

Our commercial specialists focus on entry-level industrial investment opportunities. Industrial property has remained Australia’s strongest performing commercial sector, though activity has moderated from previous peaks.

Finally, our rural specialists deliver a comprehensive analysis of Australia’s horticulture sector, examining how commodity markets and seasonal conditions influence rural property values.
The confluence of government housing policy, market dynamics, and economic conditions creates complexity that rewards strategic thinking over opportunistic speculation. Navigating this environment successfully demands access to independent, professional advice grounded in detailed market intelligence. That expertise is precisely what Herron Todd White continues delivering to clients navigating today’s property markets.

Gary Brinkworth
CEO