New analysis from Cotality suggests the expanded 5% deposit guarantee is reshaping the lower-priced end of the housing market, with first-home buyers and property investors increasingly competing for the same stock.
This is playing out against a broader upswing in values. Cotality’s April 2026 chart pack puts national dwelling values 9.9% higher over the year, with Perth up 24.3% and Brisbane, Adelaide, and Darwin at record highs.
Over the first six months of the expanded scheme, properties with an estimated value below the relevant caps rose 6.7%, almost double the 3.6% growth recorded for homes above the thresholds.
Cotality’s research director Tim Lawless and principal quantitative analyst Thomas Clarkson note that the divergence began to open from late August, when the federal government flagged the October expansion, indicating some demand was “brought forward” ahead of the policy change.
That demand is visible in the lending data as well. Cotality notes that “first-home buyer lending was up sharply in Q4, increasing 6.8% by volume and 15.5% by value.” First-home buyers now account for 29.6% of owner‑occupier lending, while investor loans surged 31.8% over 2025 and now make up 39.7% of new lending by value.
The pattern is broad-based. Every capital city and regional market except Regional Western Australia and the Northern Territory has seen stronger growth for properties under the caps. In Sydney, sub‑cap homes gained 4.1% in six months while those above the cap slipped 1.1%, a 5.2 percentage point gap that underscores how tightly demand is clustered around eligibility levels.
As prices climb, the pool of qualifying suburbs is shrinking, narrowing the range of areas where first-home buyers can use the scheme. Nationally, 48.6% of suburbs had a median house value below the caps just before the expansion went live on 1 October; by March that share had fallen to 39.5%. For units, the portion dropped from 92.7% to 89.1%.
Darwin now has only 10.3% of suburbs with a median house value below its $600,000 cap, while Perth sits at 11.6%, down from roughly one-third in September. Sydney, helped by a higher $1.5 million cap and softer recent growth, still has 46.8% of suburbs under the threshold.
The other major constraint is servicing a high loan-to-valuation mortgage. Cotality highlights that the average first-home buyer loan rose 7.7% in the December quarter to $606,400, while subsequent rate rises have already shaved about $34,300 off the borrowing capacity of a typical $100,000 household.
With a three‑percentage‑point buffer applied to an average variable rate of 6.01% in March, today’s first-home buyers must show they can afford repayments “at an interest rate around 9% or higher”.
Lawless and Clarkson also caution that the scheme’s impact will fade, warning it is likely to “gradually lose its stimulatory power”, as more homes drift above the thresholds and a growing share of would‑be buyers hit the serviceability wall.
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