AAA<\/p>\n
Didn\u2019t anybody drafting last week\u2019s budget think of the 95 per cent first home buyers?<\/p>\n
In October last year, the government pulled the trigger \u2013 three months early \u2013 on a hugely expanded Home Guarantee Scheme, which allows first homebuyers to purchase with a 5 per cent deposit and avoid expensive lenders\u2019 mortgage insurance (usually payable below a 20 per cent deposit).<\/p>\n
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Labor\u2019s 5 per cent deposit scheme spurred an influx of first home buyers who are now set to be punished by next years taxation changes.Dion Georgopoulos<\/p>\n
The means test and cap on numbers were abolished so that every first home buyer suddenly became eligible. At the same time, the allowable purchase price was dramatically increased, closer to the median house price in each area.<\/p>\n
And such was the flood of first-time buyers it\u2019s been blamed for spiking prices in that slice \u2013 the middle and below \u2013 of the market.<\/p>\n
Cotality data show that in the six months after October, properties below the price caps rose 6.7 per cent across the country, nearly double the 3.6 per cent increase in higher-priced properties.<\/p>\n
Of anywhere, Sydney saw the biggest price decoupling: below the cap, properties surged 4.1 per cent, while above it, they have fallen 1.1 per cent. Of course, it\u2019s all case by case. And fast forward to now and there\u2019s another sting in the tail of the Home Guarantee Scheme.<\/p>\n
Any way you cut it, the winners from this budget certainly aren\u2019t first homebuyers \u2013 no matter what the government\u2019s advertised intention.<\/p>\n
The government goes guarantor for 15 per cent of your property so that you can avoid that lenders\u2019 mortgage insurance. But after paying your 5 per cent, leg-up-onto-the-ladder deposit, you take on a debt that is rungs and rungs higher than you otherwise might: 95 per cent.<\/p>\n
Enter three interest rate rises this year, which real estate agents are reporting are dampening demand, and last week\u2019s federal budget.<\/p>\n
The capital gains tax clawback could compound an already precarious price situation. With the 50 per cent discount rolling off from July 1, 2027 for all but new build properties, being replaced by indexation, investors may well retreat.<\/p>\n
Editor’s pick \u201cInvestors tend to follow the cycles of capital gain. With the market winding down and entering a softer phase, I think it was always going to be the case that we would see less investment,\u201d says Cotality research director Tim Lawless.<\/p>\n \u201cNow, with changes to taxation policy, the pullback in the flow of new investment to the market is likely to be sharper than it otherwise would have been.\u201d<\/p>\n Lower demand, from a segment that accounted for 41 per cent of loans in the first quarter this year, could push down prices. Now, once you\u2019re in, the value of your property on paper matters not \u2013 or it doesn\u2019t if you can hold on to that property.<\/p>\n And the good news is that every buyer has to pass a 300-basis-point rate stress test before qualifying for a loan. So recent first homebuyers have proven they could still cope with 225 basis points more of rate rises.<\/p>\n At least, they proved it before the price of petrol \u2013 and everything \u2013 jumped. Hanging on, in reality, may be feeling like a white-knuckled ride.<\/p>\n And what of first home buyers who have been deposit saving, and application prepping, and are just ready to finally buy? A 95 per cent loan on now higher-priced property that may go down in value, if only temporarily, seems a bunch more risky.<\/p>\n Of course, first homebuyers still have the option of the rent-vesting strategy. This is where you buy an investment property to let out, maybe in a cheaper area, and continue to rent yourself.<\/p>\n But the budget\u2019s taken the shine off this, too. While existing investors will continue to use negative gearing and deduct losses from their income, you must now buy new builds to do so.<\/p>\n And right there is another artificial property market influence at the first homebuyer end: investor demand for new-build apartments is likely to be at the expense of existing apartments. Good for first home buyers who want to buy an existing apartment; not so good – perhaps \u2013 for those who have just bought.<\/p>\n Of course, first home buyers could always abandon their property bid altogether and go the share investment option, as many young Australians now are.<\/p>\n Vanguard reports that the number of people sub-40 who are investing in exchange-traded funds \u2013 funds that trade like shares but mirror whole market returns \u2013 has doubled in the past two years.<\/p>\n But there\u2019s also a new budget hit to this one. The capital gains tax clawback means an end from July 1, 2027 to the 50 per cent tax discount on any investment that has been held for 12 months \u2026 shares too.<\/p>\n The way it will then work is that only the inflation rate for a given year will be knocked off your gain, and the result is subject to a minimum 30 per cent tax rate anyway.<\/p>\n Editor’s pick One thing that was left alone in the budget, besides superannuation, was the treatment of dividends and the franking credits investors get for the tax that companies have already paid.<\/p>\n In tandem with the harsher capital gains tax regime, this may swing share investors towards higher-yield, income-generating stocks rather than those that will potentially deliver higher growth.<\/p>\n Any way you cut it, the big winners from this budget certainly aren\u2019t first home buyers \u2013 no matter what the government\u2019s advertised intention. Indeed, the biggest winners may well be accountants, wealth advisors and property valuers.<\/p>\n Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at nicolessmartmoney.com<\/a>. Follow her on Facebook<\/a>, X<\/a> and Instagram<\/a>.<\/p>\n Advice given in this article is general in nature and is not intended to influence readers\u2019 decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.<\/p>\n Expert tips on how to save, invest and make the most of your money delivered to your inbox every Sunday. Sign up for our Real Money newsletter<\/a>.<\/p>\n Save<\/p>\n You have reached your maximum number of saved items.<\/p>\n Remove items from your saved list<\/a> to add more.<\/p>\n From our partners![\"Don\u2019t](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/05\/1778899095_876_961d79e95eadf062254dacdfb5f8d227030d0b72.jpeg\")
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Treasurer Dr Jim Chalmers during a television interview following the budget.Alex Ellinghausen<\/p>\n![\"Adding](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/05\/9e57a9aba02820f065d671cb4b696acd2a38b7db.jpeg\")
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