Australia's Housing Market and Rental Crisis Intensify Amidst Policy Changes
Australia's Housing Market and Rental Crisis Intensify Amidst Policy Changes
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The introduction of the Albanese government's 5% deposit scheme for first home buyers at the start of October has led to a noticeable uptick in housing prices.
According to Cotality’s latest data, October saw the strongest rise in house prices since June 2023, with a 1.1% increase that equates to a 2.9% rise over the quarter in Australia's major cities.
Over the past five years, housing values have surged by 43.9% across these areas. Cotality's research director, Tim Lawless, attributes this recent demand and price increase to the lower-to-middle market segment, which has been particularly stimulated by the deposit scheme. Housing values increased by 1.4% in the middle market and 1.2% in the lower market, while the upper market experienced a more modest growth of 0.7%.
This policy has sparked debate due to its predictable impact on prices. Traditionally, demand-side affordability measures have been seen to drive house prices up, consequently increasing the mortgage burden on new buyers. The potential downside is significant; first home buyers may end up with substantial loans and little equity, leaving them vulnerable to interest rate hikes and market fluctuations. Furthermore, as the government guarantees 15% of these mortgages, taxpayers could face financial risks if many homes are sold due to loan defaults.
In parallel, the rental market in Australia is facing its own crisis. Cotality reported a historically low national rental vacancy rate of just 1.4% in October, alongside a steady rise in rental prices. Over the past three months, the national rental index has consistently risen by half a percent each month, marking the most significant monthly rental increase since May 2024. This follows a significant 43.8% increase in median rents over the last five years, substantially impacting tenants' annual expenses.
The shortage of housing is exacerbated by the country's construction sector falling behind government targets. Australian Bureau of Statistics data highlighted a decline in dwelling completions by 2% for 2024-25, with results 27% below the Albanese administration's goals. Concurrently, net overseas migration has soared, with former immigration department deputy secretary Abul Rizvi predicting a net annual migration of about 300,000-a 15% increase over Treasury's forecasts.
This escalating migration poses further challenges, as it adds pressure to an already strained housing market. Rizvi's estimates suggest that Australia's housing shortage could worsen considerably, potentially doubling to 400,000 homes over the next five years.
Critics argue that the government has not met its promises to maintain a restrained and high-quality migration program, instead citing the shift to a larger and more temporary framework. This, coupled with insufficient housing supply to meet growing demand, poses a continuing threat to housing affordability, particularly burdening renters across the nation.
Published:Monday, 3rd Nov 2025 Source: Paige Estritori
Please Note: If this information affects you, seek advice from a licensed professional.
The introduction of the Albanese government's 5% deposit scheme for first home buyers at the start of October has led to a noticeable uptick in housing prices. According to Cotality’s latest data, October saw the strongest rise in house prices since June 2023, with a 1.1% increase that equates to a 2.9% rise over the quarter in Australia's major cities. - read more
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Knowledgebase
Second Mortgage: A type of subordinate mortgage made while an original mortgage is still in effect.
