The expansion of the Home Guarantee Scheme from 1 October is set to unleash a wave of first-home buyer demand. For investors, that means more competition in the same suburbs and price points — and a market that will require a sharper strategy to stay ahead.
While the policy removes deposit hurdles for new entrants, it also channels more competition into the same affordable suburbs and property types that investors target.
For investors, that means sharper bidding pressure in entry-level markets, short-term price uplift, and the risk of higher finance costs if lenders’ mortgage insurance (LMI) costs rise for those outside the scheme. In other words, this is not just a first-home-buyer policy; it’s a shift that could reshape investor strategies over the next 12 to 18 months.
Competition for the same stock
First home buyers and investors tend to target the same entry-level homes: smaller houses, townhouses and units. With investors now making up 35% of new loans nationally and over 40% in New South Wales, demand is already strong.
Domain chief of research Nicola Powell notes that investors are quick to react to interest rate cuts, potentially putting them in head-to-head bidding wars with new buyers.
Short-term price growth
The expansion of the HGS is set to amplify that pressure. The Housing Industry Association expects more first-home buyers to enter the market immediately, especially in suburbs where they are most active. According to the Australian Financial Review, this could increase national prices by 3.5% to 6.6% in the first year, although Treasury’s estimate is far lower at 0.5% over six years.
Either way, the price segments where investors and first home buyers overlap are the ones most likely to experience short-term uplift. At the same time, as more renters transition into homeownership under the scheme, some suburbs may see a temporary dip in rental demand. While this won’t dramatically affect vacancy rates in tight markets, investors should keep an eye on shifting tenant dynamics in areas popular with first-home buyers.
Broader buyer access
The higher property caps under the expanded HGS mean many more homes will now fall within reach of first-home buyers.
Sydney’s cap has risen from $900,000 to $1.5m, bringing two-thirds of homes into play instead of less than a third, according to PropTrack. Similarly, Melbourne’s $950,000 cap will now cover 64% of homes, up from 51%.
This expansion opens up dozens of additional suburbs, including areas that investors traditionally target. Even prestige postcodes may see more first-home buyer activity if buyers choose apartments over houses.
Finance costs for investors
While first home buyers can avoid LMI under the scheme, investors are excluded. This is significant because a report by Lateral Economics for the Insurance Council of Australia warns that average LMI costs could rise by 19% for those still required to pay it, including investors purchasing above scheme caps or with deposits of less than 20%.
The increase is driven by a projected 30% decline in LMI activity as more first-home buyers opt to bypass it. With operating costs largely fixed, estimated at 45% of provider expenses, a fall in volume means those costs must be spread across fewer policies, pushing average expenses higher. Providers are expected to recover these losses by lifting LMI premiums, with investors among those most affected.
That means investors relying on high leverage may face higher entry costs than before. Factoring this into finance planning is critical, particularly for SMSF buyers and those building multi-property portfolios.
Our view
The expanded HGS is not just a policy for first-home buyers; it also changes the dynamics for investors. Competition in the affordable segment is expected to intensify, leading to short-term price growth, and financing conditions may become more challenging for those relying on smaller deposits.
At SAFORE, we view this as an opportunity for a decisive strategy. For some clients, moving early to secure the right property may help capture short-term gains. For others, particularly those targeting quality new builds with substantial depreciation benefits and tenant appeal, a disciplined strategy will matter more than timing. In both cases, clarity and planning will be the edge.
Are you ready for the impact of the expanded Home Guarantee Scheme?
At SAFORE, we guide investors with strategic, research-driven planning — helping our clients cut through short-term noise and adapt to policy changes, market shifts, and government incentives. Our focus is on building resilient portfolios that manage financial risks and deliver lasting success.
Call us on 1300 69 77 67 or click here to see how a tailored strategy can position you ahead of the market.
