Alan Weiss on the Home Guarantee Scheme: Help or Hype?
After 35 years in Australian real estate, I’ve seen it all — booms, busts, 18% interest rates, and countless government interventions promising to “fix” housing affordability. So when I see a new headline about the Federal Government’s expanded Home Guarantee Scheme (HGS), I don’t just see a policy. I see its ripple effect. And right now, those ripples are looking less like relief — and more like another wave pushing prices higher.
The intention is admirable: helping first-home buyers get a foot in the door. But behind the glossy promise lies a complex mechanism that risks doing the opposite of what’s intended. The scheme allows eligible buyers to purchase a home with as little as a 5% deposit, avoiding the sting of Lenders Mortgage Insurance (LMI). It’s being sold as a game-changer. In truth, it’s a double-edged sword wrapped in good intentions.
Australia’s Housing Reality
Let’s be frank — Australia has a housing crisis, not just a price problem. Home ownership for an entire generation is slipping from “difficult” to “unattainable.”
In 2000, the average first-home buyer was around 25 years old. Today, it’s closer to 34. The reason is simple: wages have stagnated while prices have soared. Saving a 20% deposit for a median-priced home now takes a typical dual-income household around six years — and for single buyers, it’s near impossible.
The Global Context
We’re not alone in this struggle. Countries like Canada, New Zealand, and the UK are all battling the same supply-demand imbalance. But Australia consistently ranks among the least affordable markets in the world when comparing median incomes to median home prices.
Why? Because we’ve turned property into a national obsession — an investment vehicle rather than a fundamental need. The cultural belief that property must always rise in value has baked inflation into the system, distorting what should be a pathway to stability into a speculative sport.
The Scheme’s Real Impact
By lifting income and property price caps and expanding eligibility, the government has made the scheme appear generous. But when more buyers chase the same limited supply, prices rise — it’s basic economics.
The Treasury forecasts a modest 0.5% price increase. My experience — and industry modelling from the Insurance Council of Australia — suggests a far sharper rise of 3.5% to 6.6%. By removing the friction of LMI, the scheme acts as an accelerator in an already overheated market.
Location and Feasibility
Even with increased price caps, this scheme won’t stretch to Sydney’s East or Melbourne’s inner suburbs. Most eligible buyers will be pushed to outer-ring suburbs or regional centres, facing longer commutes, fewer amenities, and slower capital growth.
The core issue of land cost in prime areas remains untouched. Until planning and zoning bottlenecks are addressed, affordability will stay out of reach.
The Debt Dilemma
A 5% deposit means a 95% Loan-to-Value Ratio (LVR) — a razor-thin equity buffer. If the market dips, these buyers could quickly fall into negative equity, owing more than their property is worth.
They’ll also pay significantly more interest over a 30-year term. The scheme may get buyers in the door sooner, but it also sets them up with one of the heaviest debt loads of their lives.
Who Really Qualifies?
The removal of income caps subtly shifts the program’s focus. It’s no longer purely for low-to-middle income earners — it now caters more to dual-income professionals with solid savings and borrowing power.
To purchase even a median-priced home (around $800,000) with a 5% deposit, the required loan of $760,000 demands a household income well above $120,000–$150,000, depending on interest rates and living costs.
Banks still apply strict serviceability tests, and government guarantees don’t change that. Many single-income earners, including teachers, nurses, and essential workers — the very people this scheme was meant to help — are still priced out.
The Rent vs Buy Equation
Renting is becoming more expensive, no question. But swapping rent for a mortgage under the HGS can be like trading one burden for another.
Buying a home with a small deposit often leads to higher long-term costs — interest, maintenance, rates, and insurance — which can quickly erode the short-term benefit of “getting in.” The emotional relief of ownership shouldn’t obscure the financial reality.
The Bigger Picture
This scheme treats accessibility (helping people scrape together a deposit) but ignores affordability (the real cost of housing).
Until the government addresses supply-side reforms — rezoning, streamlining approvals, incentivising new construction, and tackling infrastructure bottlenecks — these demand-side incentives will continue to inflate prices.
It’s politically attractive, sure. It creates the illusion of progress. But in reality, it props up existing asset values, benefitting current owners and investors far more than first-home buyers. The irony is striking: a scheme designed to promote affordability depends on prices continuing to rise to protect the government’s own exposure to defaults.
My Take
The Home Guarantee Scheme opens the door — but it’s a door to massive debt.
Young buyers need to resist the pressure of FOMO and approach the decision with clear eyes and long-term thinking.
Ask yourself: Is shaving a few years off the deposit timeline worth decades of higher repayments, and the risk of buying at the market’s peak?
Until we fix the structural issues — supply, planning, and affordability — these policies will remain what they’ve always been: well-intentioned optics that make good headlines but bad economics.
Final Thought
Australia doesn’t need more incentives to buy.
It needs a strategy to build.
