With the 2025 Australian federal election approaching, the Labor Party and the Liberal-National Coalition have successively introduced housing policies targeting first-time homebuyers. While both parties have stated their intention to help young people enter the property market, the market generally believes that these policies will indirectly stimulate demand, driving up property prices and creating significant value-added opportunities for real estate investors. A major Australian residential analysis agency predicts that if these policies are implemented as planned, Australian house prices could rise by 81% to 151% within 12 months.
Demand will be "artificially accelerated" with limited changes in supply
According to Louis Christopher, managing director of real estate research firm SQM Research, who told the Australian Financial Review, no matter which party ultimately wins the election, the policies it proposes will be essentially "inflation-oriented" and will not fundamentally change the supply structure.
The Labour Party proposed expanding the existing first-home buyer support program to cover all housing types, whether new or existing. In contrast, the Liberal-National Alliance focused on encouraging the purchase of new buildings and proposed a number of additional measures, including:
- Allow buyers to withdraw up to A$50,000 from their superannuation as a down payment;
- Mortgage interest is tax deductible;
- Relax banks' stress testing requirements on borrowers' repayment ability (i.e. mortgage serviceability buffer).
Christopher criticized the above measures as "short-term patchwork solutions" that fail to address the structural supply shortage. Although they have short-term political benefits, they may push up housing prices in the long run, increasing pressure for further interest rate hikes.
"Both policies have inflationary effects," said Louis Christopher. "While further modelling is needed, a rough estimate suggests house prices could rise by between 81 and 151 per cent in the 12 months following the policy implementation."
Existing buildings are facing more pressure, with first-time homebuyers shifting to mid-priced projects.
Ray White Group CEO Dan White pointed out that the Labor Party's policies cover a wide range and have a particularly significant impact on the prices of existing residential properties; in contrast, the Coalition Party's policies are more concentrated on new units, and the impact on the overall market is relatively dispersed.
Maree Kilroy, senior economist at Oxford Economics, described the Coalition's policies as a "sugar hit" that could repeat the sharp rise in house prices after the HomeBuilder program in 2020.
She said: "The combination of various measures, including tax incentives, access to superannuation funds, and lower loan requirements, is very attractive to first-time homebuyers and is expected to boost transaction volumes for mid-priced new properties."
Investors should seize the opportunity to deploy three major strategies
Although the policy is mainly aimed at supporting owner-occupiers, given the imbalance between supply and demand in the market, investors can still benefit if they make early investments. Suggestions include:
- Prioritize purchasing homes in low- to mid-priced areas that are still experiencing valuation troughs to avoid price increases after the policy is introduced;
- The lock-in policy does not cover property types such as second-hand terraced houses and high-quality old buildings, which have room for appreciation;
- Pay attention to land with strata title or redevelopment potential to capitalize on medium-term planning and rising rental demand trends.
The Reserve Bank may need to review its interest rate policy
Ben Phillips, an associate professor at the Australian National University, said that if demand surges, the central bank may need to re-examine the sensitivity of its interest rate policy tools. He noted that if the policy implementation offsets some of the impact of the rate hike, it could reduce the effectiveness of monetary policy and create policy constraints.
"If house prices rise rapidly due to tax cuts and lower lending rates, the Reserve Bank will struggle to control inflation through interest rate adjustments alone," Phillips stressed.
The short-term golden period may be fleeting
Overall, the Australian housing market is likely to heat up further in the short term due to policy stimulus. For investors with liquidity seeking capital appreciation, now may be a good opportunity to enter the market. However, given that these measures are primarily aimed at stimulating demand and lack fundamental supply-side reforms, investors should carefully manage their risks and avoid buying at high prices.
If you're looking to understand which areas are likely to benefit from these policies, or want to identify potential value gaps amidst the current supply stagnation, the ANP team has a network of real estate experts based in Australia who can provide you with regional comparisons, asset assessments, and strategic deployment advice.
Learn more or contact us for one-on-one asset allocation consultation.
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