The Real Estate Buyers Agents Association of Australia (REBAA) says many buyers have panicked in the aftermath of the Home Guarantee announcement and are overpaying to secure a property before the start date.

Concerns have been raised that the increased demand from unlimited places and no income caps on the Home Guarantee could drive up prices, and REBAA president Melinda Jennison says this has already begun.

“Properties that were selling for $750,000 last month are now selling for close to $800,000,” she said.

“Many buyers are reportedly panicking with some purchasing sight unseen or overpaying to secure a property before 1 October.”

REBAA officials across the country say there’s been a surge in buyer activity, with first home buyers exploring more expensive properties previously out of reach and investors swooping in to capitalise on a potential price surge.

NSW Representative Linda Johnson says “Fomo [Fear of missing out] and panic is in the air”.

“We have seen an increase in both investors and first home buyers looking for entry level family homes, as close to major centres as possible, with capital growth and getting into particular hotspots before it’s too late being the main focus.”

Read more: What is the First Home Guarantee?

Will October drive prices up further?

Ms Jennison says the property market is “already in frenzy” and expressed concern about more price inflation once the expanded scheme actually kicks in.

“What was $800,000 will soon be $900,000, which will make it even more difficult for first timers to secure finance for a home even with the scheme’s 5% deposit on offer,” she said.

Treasury modelling found the expanded HGS would likely have a “relatively modest” impact on demand for housing, finding the number of new first homebuyers would be “unlikely to be of sufficient scale to represent more than a small proportion of the 555,000 residential property transactions that took place in Australia”.

However this has been disputed, with modelling from the Insurance Council of Australia suggesting the expansion will drive up prices by 3.5 to 6.6% in 2026 – up to 9.9% in markets preferred by first home buyers.

Last week, RBA Assistant Governor Brad Jones said it could “add to overall housing credit in the order of 1-2%”, but also referred to Treasury expectations that supply will increase in line with the extra demand.

“Their sense is…that will end up dampening the price effect over the medium term.”

FHG worth the extra interest cost?

A less discussed aspect of the First Home Guarantee is whether it’s actually worth it for some first home buyers.

While the FHG means not paying Lenders Mortgage Insurance (LMI) even with a deposit as small as 5%, higher Loan to Value Ratio (LVR) loans usually have higher interest rates than a borrower with a larger down payment.

For many this is worth it to get into the market sooner as property prices appreciate, and a new piece of research from Cotality suggests even without house prices appreciating it could still be worth it to save on the rent.

Cotality found that in every city, saving money on rent and LMI is worth paying the extra interest, with potential savings ranging from $1,971-$15,971 in Canberra to $72,252-$96,252 in Sydney.

However, Cotality Head of Research Eliza Owen said there will “almost certainly” be a short term boost to the price of properties up to the thresholds of the scheme (the property price caps in each city/region).

“This policy is ultimately a demand side stimulus which fails to address why deposits – and now rents – are so unaffordable in the first place,” she said.

Picture by Paddy Pohlod on Unsplash

Ready, Set, Buy!

Learn everything you need to know about buying property – from choosing the right property and home loan, to the purchasing process, tips to save money and more!

With bonus Q&A sheet and Crossword!