Prices rising fastest in inner cities and growth towns during expanded 5 per cent deposit scheme
The first month of the expanded 5 per cent deposit guarantee has seen an increase in house price growth. (ABC News: John Gunn)
In short:
Inner cities, wealthy suburbs and fast-growing towns topped the list of house price surges in October.
The month was the first of the expanded 5 per cent deposit guarantee, but experts at Cotality urge caution in linking the two.
What's next?
Experts say more time will be needed to assess the full effects of the scheme.
Inner cities, wealthy suburbs and fast-growing towns topped the list of house price surges in the first month of the federal government's expanded 5 per cent deposit guarantee.
A deep dive into the numbers from data company Cotality shows that homes below the price caps for the first home buyer scheme grew more than 20 per cent faster than homes above the caps — 1.2 per cent compared to 1 per cent for the month of October.
That is not unprecedented, since this lower end of the housing market has been steadily outperforming the top end for nearly two years. But the October result is in the top sixth of those recorded for the last 16 years.
And a handful of areas saw more pronounced gaps, including inner Melbourne and Perth, northern Brisbane, Darwin, Geelong, the Central Coast, Wide Bay, and Sydney's inner city and northern beaches.
Melbourne's inner east, which includes Kew, Hawthorn, Box Hill and Doncaster, had the biggest differential, with homes covered by the scheme growing more than four times faster than homes that were not — 1.7 per cent compared to 0.4 per cent.
| Areas with the biggest discrepancy in October | ||
|---|---|---|
| Area | Homes below price caps | Homes above price caps |
| Melbourne — Inner East | 1.7% | 0.4% |
| Perth — Inner | 1.8% | 0.8% |
| Sydney — Northern Beaches | 0.9% | 0.0% |
| Sydney — Eastern Suburbs | 1.4% | 0.5% |
| Darwin | 2.0% | 1.3% |
| Sydney — North Sydney and Hornsby | 0.3% | -0.3% |
| Geelong | 1.2% | 0.6% |
| Brisbane — North | 1.9% | 1.3% |
| Central Coast | 0.9% | 0.4% |
| Wide Bay | 0.9% | 0.4% |
"It is difficult to connect [price hikes] directly to the scheme expansion, because there are many factors pushing the market higher," said Thomas Clarkson and Eliza Owen of Cotality, who co-authored a research note on their findings.
"In some markets, there has been a more notable increase in values below the scheme thresholds, suggesting localised market impact," the pair said, adding those topping the list were mostly "desirable" areas.
"A causal relationship is difficult to establish, but it's useful to have this perspective. It is also worth noting that it might be too soon for the full impact of the expanded scheme to show up in price growth, and the numbers are worth reviewing over time."
Results are 'modest': Labor
Labor says the results are "modest" and consistent with Treasury modelling that found only a 0.6 per cent price bump in six years' time, compared to if the deposit guarantee was not expanded. That modelling has not been published.
The government has released figures showing 5,778 homes were bought by first home buyers in October using the guarantee, which represents about one in 10 sales.
That figure was only 1,800 higher than the year before, when the guarantee was still in place but subject to income caps, which have now been removed.
"This program is working, it's making a big difference to the people who need our help, but only bringing a moderate number of new buyers into the market in this first month," Housing Minister Clare O'Neil told the ABC.
Liberal housing spokesperson Andrew Bragg said the figures "confirm what first home buyers already know: Labor's distorted 5 per cent deposit scheme is driving demand at the low end and inflating entry-level prices".
Price growth was faster for standalone houses compared to units under the scheme, with 1.3 per cent growth for houses and 1.0 per cent for units. These outcomes were broadly similar to the overall outcome in historic terms, also falling in the top sixth.
Counter to the trend were the results in Hobart and Canberra, where homes above the price caps for the scheme grew faster than those below.