We are expediting Australia’s enhanced First Home Guarantee/”5% deposit” program, which includes uncapped, higher price caps and eliminated income constraints. Although independent modelling and industry associations warn that the demand shock might be significantly higher, triggering price hikes of up to ~10% in susceptible areas, Treasury modelling estimated a tiny upward price effect of 0.5% over six years. Strong population growth, limited supply, and a near-term REIWA price rise estimate of up to 10% make Perth one of those vulnerable markets. In the short to medium term, a 5% deposit plan is anticipated to increase competition and drive up prices.

This blog is supported by essential data from REIWA and the ABS, which also highlights policy tradeoffs that Bargoti Real Estate should anticipate in its marketing, portfolio strategy, and client advice.

What is the policy change? — succinctly

• The government extended the Home Guarantee and First Home Guarantee programs to allow qualified first-time homebuyers to buy with a 5% down payment and avoid having to pay Lenders Mortgage Insurance (LMI).  
• With the expansion, many more buyers will be able to own real estate because it eliminates earlier place restrictions, loosens income restrictions, and increases property price ceilings.  
• The government’s Treasury created an additional impact study for the roll-out.
• The reason this matters is that by eliminating LMI and permitting 5% deposits, the immediate cash barrier to entry for many potential buyers is lowered, thereby expanding the number of bidders who can place bids at any given moment.

Treasury modelling vs independent assessments

1. Treasury / official supplementary analysis

• A comparatively moderate increase in pressure on prices was predicted by the government’s analysis, which simulated consequences (the official public message suggested a limited impact relative to the overall market size).
• The released Treasury supplemental analysis supported implementation.

2. Independent modelling & industry warnings

• Treasury assumptions (take-up rates, supply response, and behavioural responses) are likely to underestimate the rising pressure on pricing, according to several independent reports and industry associations.
• For example, research referenced by Lateral Economics and the Insurance Council indicates price rises that are significantly greater than the Treasury’s forecast; published estimates predict that prices in specific markets may rise by as much as 9–10% in the first year.
• Prominent economists and media coverage have concurred that the shift may cause inflation in housing prices when supply is limited.

3. Load-bearing comparison (brief)

The Treasury assumes that take-up and supply reaction will be relatively conservative; however, the Insurance Council, Lateral Economics, and some economists think that take-up will be higher and supply response will be more constrained, which will result in greater price consequences.

Perth market snapshot — REIWA + ABS evidence (what the data says today)

The most recent and pertinent data points, along with their implications for Perth, are listed below.

1. Key REIWA findings (Perth / WA)

• Record-high median prices and recent quarter-over-quarter advances are displayed on REIWA’s market dashboards for Perth.  
• Perth’s home and flat medians have remained at record highs through 2024–2025, according to REIWA’s published market data for the metro area.  
• Depending on sustained demand, REIWA’s prediction (public remark) also predicted price growth of up to 10% in 2025.

2. Selected REIWA numbers (public pages and commentary)

According to REIWA and market estimates, the typical price of a home in Perth ranges from high six hundred thousand to low eight hundred thousand dollars in 2024–2025.

• However, some sources report medians between $750k and $865k for various months or quarterly snapshots.  
• Monthly updates are made to the Landgate-sourced datasets on the REIWA website.

3. ABS national/regional support

• In recent quarters, the overall value of residential dwellings in Australia increased significantly, according to the ABS (the June quarter 2025 release indicated a $213.8 billion gain to $11,564.0 billion).
• Western Australia had a 2.7% increase in dwelling values during the June quarter.  
• The ABS also reports CPI and housing-related components; in recent quarterly CPI movements, housing-related components continued to be one of the major contributors.
• These broad macro indicators demonstrate that home values have been increasing and that Western Australia, including Perth, has made a significant contribution to the growth of home values nationwide.

4. Other industry snapshots that matter for Perth

• Perth is one of the capital markets with the fastest growth in late 2024–2025, according to independent market sites and industry comments (PropTrack, realestate.com.au, MortgageChoice, etc.).
• The leading suburbs in Perth have shown gains of 20–30%+ in certain instances.  
• Unusual buyer rivalry has been brought to light by REIWA and other industry sources (e.g., seriously deteriorated houses selling substantially above asking, multiple bidders).

5. Implication for the scheme

• Significant price increases, limited supply in many suburbs, and high buyer interest—including from interstate migration and demand related to the mining industry—have all been present in Perth.  
• Under these exact circumstances, lowering the deposit barrier may have disproportionately positive price impacts.

Transmission channels — how 5% deposits can push prices up (mechanics, step-by-step)

A straightforward, step-by-step breakdown of the economic avenues through which the strategy can reduce costs is presented below.

1. Liquidity/expansion of the buyer pool: Fewer prospective buyers are turned away upfront because of deposit restrictions. Eliminating LMI and permitting 5% deposits makes purchasing possible for many people who would otherwise continue to rent. As a result, more buyers are vying for the same stock. (Shock to direct demand.)

2. Reduced effective transaction costs: By avoiding LMI, you can enhance your ability to bid by lowering your upfront cash costs. Because they don’t need as much money up front, buyers can bid higher.

3. Bunching into specific price segments: We anticipate concentrated demand increases in price bands close to the scheme’s property price caps (expanded), such as entry-level suburbs. Competition increases if a large number of buyers target a similar cap-limited zone.

4. Faster entrance and expectation behavioural effects: When buyers anticipate that others would profit from the plan, they could act sooner or more forcefully (FOMO), which speeds up price movements.

5. Mechanisms of credit expansion: While mortgage serviceability standards still constrain severe leverage, lenders may reprice or expand credit availability to serve a larger population of first-time homebuyers.

6. Supply constraints blunt the response: If land, approvals, construction capacity, or time-to-market cannot all be expanded rapidly, then rising demand will result in higher prices rather than more homes. Perth’s supply response is slow in the short run due to land supply frictions and planning approvals. Local industry reports from REIWA indicate that supply will be limited in 2024–2025.

7. Short-term concentration, long-term dilution: The short-term (6–18 months) is when the initial price impact is most noticeable. Firm supply plans, approvals, or construction activity may mitigate the mid- to long-term pricing impact. Critics contend that to prevent pure demand-side inflation, policy should be combined with supply-side measures.

Quantitative scenario modelling (transparent, simple — “what could happen” for Perth)

Three transparent possibilities are presented below, based on assumptions and published inputs from REIWA/ABS data, Treasury, and Insurance Council/Lateral Economics opinion. These serve to quantify tenable ranges and emphasise sensitivity to take-up and supply elasticity; they are illustrative rather than formal econometric models.

1. Baseline inputs (public sources)

With REIWA/industry snapshots reporting medians varying from $750k to $865k across months, we choose ~$800,000 as a reasonable mid-point for 2025 snapshots.

• This is the median property price in Perth (a recent figure for illustration purposes).
• Assuming moderate take-up and time lags, the Treasury modelling baseline shows a minimal total price effect of 0.5% over six years nationally.
• Lateral/Insurance Council scenarios: according to press-cited modelling, price rises in high-demand markets might range from 3 to 10%+ in the near future (some reports up to ~9.9% first-year impact).

2. Scenario A: Conservative (little supply response; low take-up)

• Ten per cent of previously rejected potential buyers enter the market immediately, and within two years, building approvals and supply growth will balance out half of the demand shock.
• For the first 12 months, the estimated price effect in Perth is between 1% and 2% upward pressure.
• Once supply catches up, the market stabilises broadly, with minor, localised price increases in hot suburbs.

3. Scenario B: Middle case (moderate uptake; sluggish response from the supply)

• Assumptions: restricted supply response over 12 months; behavioural impacts increase bidding intensity; 20–30% take-up among eligible buyers.
• For the first 12 months, the Perth price effect is expected to be between 3 and 6% upward pressure.
• Interpretation: as second-steppers sell into the boost, entry-level suburbia prices rise visibly and cascade into nearby price bands.

4. Scenario C: Significant impact (high uptake; severely limited supply — Insurance Council/ Lateral scenario)

• Assumptions: short-term speculative and FOMO bidding; significant take-up since the program is unlimited; removal of income limitations raises eligibility materially; and supply stays tight.
• The first-year pricing effect in Perth is estimated to be between 7% and 10%, or higher, in the most impacted corridors; the weighted median may approach 5% to 10%.  
• This is in line with industry concerns that pressure points could rise by as much as 9.9% in the first year, according to some models.

5. Why Perth is likely closer to Scenario B or C (not A)

• The ABS shows rising dwelling values in WA, and REIWA’s recent market behaviour—substantial transaction volumes, record medians, and double-digit growth at the suburb level—indicates that the market is already booming.  
• More buyer liquidity is more likely to drive prices in a market with tight listings and high demand than in one with poor listings.

Who wins and who loses — distributional effects (Perth lens)

1. Potential winners

• As prices continue to rise, current sellers and new homeowners will experience financial gains.
• For homeowners who intend to upgrade, more equity could be beneficial.
• Developers with ready-to-market inventory can set prices and make quick sales.
• Some first-time homebuyers who would otherwise continue to rent and purchase before significant price increases occur.

2. Potential losers

• Price rises may exceed savings from avoided LMI, which may make some intended beneficiaries worse off.
• Many first-time homebuyers are seeing increased competition.  
• According to industry opinion, greater purchase prices and serviceability stress may not be entirely offset by the averted LMI.
• If investors sell (to profit from higher prices), rental supply may become more scarce; increased competition in the buying market may limit renting availability.
• Borrowers who push their budgets into higher LTV (loan-to-value) ranges are more susceptible to rate increases or shocks.

3. Equity and justice angle

Detractors contend that the program helps individuals who are already on the verge of buying (and, in certain situations, higher-income buyers if income limitations are lifted) rather than those who are actually unable to establish a presence. One of the main topics of discussion in public is this.

Systemic risks & potential countermeasures

1. Risks to macro and financial stability

• For banks and the financial system, increased LTV lending to a larger number of buyers increases portfolio risk, especially if home prices stagnate or even reverse.  
• Some analysts have pointed out that if the plan is extensive and interest rates rise later, this could become a stability issue.

2. Potential reactions from the government or regulations

• To guarantee lending standards, APRA should provide lenders with stricter macroprudential guidelines.
• If there are market disruptions, price thresholds may be adjusted or limitations may be reinstated.
• Governmental responses to price inflation that are supply-focused (fast-tracked clearances, incentives for new constructions).

Systemic risk is reduced by careful lending and active market monitoring; the worst effects occur when demand spikes rapidly while supply and regulatory oversight lag.

Practical advice for Bargoti Real Estate — tactical moves (immediate to 12 months)

Bargoti can take the following steps to assist customers, capitalise on opportunities, and mitigate reputational risk.

1. For sellers and listing tactics

• Setting asking prices with a realistic range that accounts for 3–8% uplift scenarios is one way to adjust pricing guidance upward in hot micromarkets where there is evidence of numerous bidders.  
• Utilise REIWA snapshot data at the suburb level to display historical patterns.
• Staging and speed to market should be prioritised since first-time homebuyers and investors hoping to profit from the plan will find properties that are ready for fast settlement more appealing.

2. For buyers (particularly first-time homebuyers)

• Execute transparent affordability modelling to show customers the net benefit of avoiding LMI vs the likely price increase in their target suburbs.
• Avoiding LMI frequently won’t compensate for price increases.  
• Give worked examples of typical entry-level suburbs and the median in Perth.
• Promote cautious bidding boundaries by avoiding overstretching and by displaying stress tests at interest rates that are 50–100 basis points higher.
• Examine other options, such as apartments or adjacent suburbs, where price pressure may be less pronounced.

3. Regarding investors

• Reevaluate yields and cap rate expectations: rental yields will compress if prices increase by 5–10% quickly unless rents increase in line with the price increase.
• If the supply of investors changes, take the demand for rents into account.

4. For project marketing and developers

• Give priority to products that cater to the demands of first-time homebuyers (compact apartments, inexpensive townhouses)
• Marketing should emphasise deposit-friendly messaging while simultaneously establishing standards for long-term value and serviceability.
• Releases should be accelerated where permissions are in place because there might not be much time to meet induced demand before supply catches up.

Worked example (simple calculator) — Perth median illustration

1. Assumptions

• The median home price in Perth right now is $800,000, which is the rounded midpoint of the industry and public REIWA estimates for the middle of 2025.
• 20% versus 5% deposit scenarios (with LMI avoided under the program).
• LMI avoided example: based on loan amount and lender, avoiding LMI can save $20k to $40k in many situations, though LMI can vary.
• Industry messages indicate that some buyers can save a significant amount of money.

2. Case A: No plan (20 per cent down payment)

• Cost: $800,000.
• Required deposit: 20% is $160,000.
• LMI: irrelevant (no LMI with 20%).

3. Case B: With the plan (no LMI, 5% deposit)

• Price if sellers raise their bids: let’s say the price increases by 5% to $840,000 (mid-range scenario).
• Required deposit: 5%, or $42,000
• Avoid LMI, as guaranteed by the government.
• Net cash difference: Although the buyer saved $118,000 as a deposit, the buying price increased by $40,000.  
• Even with a smaller upfront deposit, the net financial position may be worse because additional interest and principal costs must be incorporated throughout a 30-year loan; in many circumstances, these costs outweigh the saved LMI.

4. Interpretation

• The plan shifts costs from upfront (deposit/LMI) to long-term mortgage servicing, lowering the deposit barrier but potentially raising the absolute price.
• As a result, some analyses suggest that the program may not benefit the most disadvantaged buyers and may instead reallocate the burden of affordability to them.

Data appendix & primary sources (selected)

• Home Guarantee Scheme Expansion, Australian Government, Supplementary Analysis (Treasury/PMO materials).
• Independent modelling by the Insurance Council and Lateral Economics was published in the press; estimations of up to 9.9% are achievable.
• Perth Metro market data, listing and rental trend dashboards, and comments on median prices are provided by REIWA.
• ABS — June Quarter 2025 Total Value of Dwellings; releases of housing components and CPI.
• Key industry comments and news coverage on the effects of the scheme: BrokerDaily, MortgageBusiness, The Guardian, The Australian, ABC, etc. (used to cross-check modelling perspectives and quotes).

12-month tactical checklist

By lowering a significant barrier for first-time homebuyers, the enlarged 5% deposit plan will increase the size of the bidding pool. The possibility of a 3–10% price increase is real (near term) in a market like Perth, which is already seeing rapid price increases, entry-level band crowding, and limited supply elasticity.

This is especially true in neighbourhoods where first-time homebuyers are concentrated. Although independent models and industry bodies point to significantly bigger, more concentrated effects, the Treasury’s modest national estimate should be regarded with care.

• Make a Perth 5%-scheme microsite that includes effect notes at the suburb level and an explanation of the program in plain English (citing REIWA & ABS).
• Create a pricing scenario dashboard (scenarios A, B, and C) that agents may utilise when interacting with buyers and vendors.
• Teach agents to provide buyers with unambiguous affordability stress tests by comparing the predicted price movement with the avoided LMI.
• Listings in suburbs with low days-on-market and a history of quick increases should be given priority; advertise them to sell more quickly.
• Inform investment customers about the possibility of yield compression and offer an analysis of alternative property types, such as homes versus apartments.
• Adapt lending/settlement timing guidance and keep an eye out for macroprudential developments in APRA/lender announcements.
• Collaborate with developers to ensure that entry-level stock is distributed to buyers seeking low-deposit entry options.

Final remarks

One effective demand-side policy that is politically noticeable is the 5% deposit plan. Independent modelling and industry bodies estimate price effects that are materially larger than Treasury’s headline projection, and in some scenarios, near 10% in pressure points. This means that the scheme runs the risk of short-term price growth acceleration in Perth’s current market context, which includes strong price momentum, constrained near-term supply, and fierce buyer competition.

To prepare, Bargoti Real Estate should provide scenario tools to clients, adjust pricing and marketing strategies, and actively counsel buyers on the net tradeoffs of entering the market in light of the new regulations.

DISCLAIMER – The information and opinion provided is for guidance and general informational purposes only. The sole intention is to provide general understanding of the subject matter so the readers can assess whether they need more detailed information. The information provided on this website should not be regarded as a financial, business, legal or real estate advice and it is strongly recommended that the readers should seek their own independent financial, business, legal or real estate advice. While every effort has been made to ensure that the information and the material is correct and up to date at the date of publication. However, we do not guarantee or warrant the accuracy or completeness of the information provided as the factors like changes in circumstances after the time of publication, may impact such accuracy or completeness. Bargoti real estate will not accept responsibility or liability for any reliance on the blog information, including but not limited to, the accuracy, currency or completeness of any information or links.