The Federal Government announced on August 25th that it will bring forward planned changes to the First Home Buyer Guarantee by three months from its planned implementation date of 1 January 2026 to 1 October 2025.
There are two key parts contained in this announcement;
The first is that property price caps which limits the scheme to properties purchased over a set limit, in Queensland increasing from $700,000 to $1,000,000.
The second part is the removal of the previous income caps. Under the existing scheme a single earning over $125,000 per annum and couples earning over a combined $200,000 pa, were not eligible to access the scheme. From 1 October, these caps will be removed.
The scheme allows a First Home Buyer to purchase a property to live in with between a 2 – 5% deposit and not pay Lenders Mortgage Insurance. On an $800,000 property, the typical 20% deposit required to avoid LMI is $160,000 while a FHB can contribute as little as $16,000 while on a $1,000,000 purchase, a typical deposit rises to $200,000 whereas, an eligible FHB can contribute as little as $20,000 towards the purchase of a new home.
LMI is of course only one of the costs associated with purchasing a new home, stamp duty, legal and bank fees and other costs can range to as high as $38,000 for someone buying a new home without FHB benefits while, with stamp duty concessions offered by the Queensland State Government, a FHB will need to tip in an additional $5,000 for a home purchased under the state concessional cap of $700,000 and reduced stamp duty for properties valued at up to $800,000.
Additional stimulus in an already heated market
Over the past 6 months, property prices (houses and units combined) in Brisbane have risen by an average of 0.46% per month (Cotality 2025). Following 3 rate cuts totalling 0.75% in 2025 and this announcement by the Federal Government, property prices in Brisbane rose on average by 1.2% in August. An early sign that the expected price acceleration into the traditionally strong Spring selling season has already begun, spurred on by rate cuts and changes to the First Home Buyers scheme.
Early anecdotal feedback from mortgage brokers to our office indicates that inquiries and applications from investors jumped sharply in August with investors seeking to get into the market ahead of an expected increase in demand by FHB from 1 October and, early inquiries from FHB who are preparing to purchase under the increased caps from 1 October.
Treasury estimates predict that the new FHB caps will only increase property prices across Australia by 0.5% while property experts (yea those guys), are pointing to a likely increase in property prices from increased demand of up to 6% on top of current growth rates for the next 12 months until property prices settle down to a more normal growth rate.
Supply remains a big, big problem
The Federal Government announced a new housing target of 1.2 million new dwellings over the next 5 years. This policy was announced for the period from mid-2024 to mid-2029. A recent report from industry lobby group, the Urban Development Institute of Australia has estimated that at the current construction rate, we will fall 393,000 short of that target, or 30% shy of the target. A separate research report by Mandala Partners, indicates that there will be a shortfall of 462,000 dwellings, which is significant either way you look at it.
The National Housing Supply and Affordability Council (a Federal Government body) estimates that, when you take into account demolitions, net supply will fall well short of the national target to 825,000 new dwellings within the Housing Accord period, 375,000 short of the national target.
This translates to an annual national target of 240,000 per year yet over the past 12 months, construction rates are running at around 170,000 new dwellings, making the 1.2 million target over the next 4 years of the policy period even steeper.
Interest rates easing
In November 2020, the cash rate (wholesale interest rate) reached an historical low of 0.10% driven by concerns for the economy during the COVID era. Cash was unbelievably cheap!
The cash rate remained low until the most recent up-cycle between May 2022 and February 2025, 13 rate rises in total over that period to a peak of 4.35%. Remembering that the ‘retail’ rate paid on most mortgages is around 2% above the wholesale cash rate, more for property investors and businesses.
The most recent easing cycle commenced in February followed by two further cuts in May and August 2025 totalling 0.75%. Expectations remain for further cuts over coming months by as much as an additional 0.75% by years end. The likelihood of further cuts largely driven by inflation and unemployment rates. Inflation now sitting at 2.1%, within the Reserve Bank’s target range of 2-3%, off from its high in December 2022 at 7.8% while unemployment sits at a relatively low 4.3%, seasonally adjusted. Full employment commonly defined as an unemployment rate that’s below 5%.
Housing affordability is bad, and getting worse
With an average mortgage sitting at around $650,000 in Queensland, each rate drop of 0.25% represents a saving of approx $1,625 pa, or $135 per month. However, a First Home Buyer looking to purchase a new home using the maximum cap of $1,000,000 and with just a 2% deposit, will be forking out over $1,000 per week in interest alone, with monthly mortgage repayments of up to $5,500 per month.
While the rate of property price growth has slowed since July 2024, we are seeing the early signs of a re-acceleration in price growth, driven in a large part by the drop in interest rates which is likely to trend up now with the addition of the earlier implementation of increased FHB price caps.
The long debated “who had it harder” question between Boomers, Gen X/Y and Millennials is easily dismissed by this graph which shows that it now takes over 10 years for a home buyer to save a 20% deposit compared to just 6 years 20 years ago.
Median dwelling prices in Brisbane have now risen to the second highest in the nation at $949,583, second only to Sydney at $1,224,341 while those who still aspire to own a free standing house are facing a median house price in Brisbane of $1,040,651 or a more affordable unit with a median $740,992.
It’s not just property prices that represent a hurdle to home ownership, its the rate of growth particularly in more affordable units and suburbs. Breaking the age old trend, unit prices are growing faster freestanding houses with annual growth rates sitting at 11.1% compared to houses at 7.3%pa (Cotality August 2025).
Development, infrastructure and Olympics construction
A report by the Queensland Major Contractors Association provides a forecast for major construction projects in Queensland out to 2029. Over 200billion in funding has been committed to a range of major construction projects across the state including in the health sector, water and energy infrastructure, transport, resources and heavy industry and to support the Olympics.
The most intense period will peak in 2027 at more than double the activity in 2025 (based on funding committed). The period from 2026 to 2029 is higher than the last peak period between 2013 and 2016 and will be sustained for several more years than the previous peak. These developments, coupled with increasing competition for skills and resources from other states, will put sustained pressure on costs, industry capability, and capacity (QMPPR).
Where to from here?
A range of factors will continue to push property prices up over the short term (1-2 years) as well as the medium and long term (next 7-10 years) in Queensland. Growth may slow for periods and even pull back like we saw in early 2023 however, the overall trend remains upward. The universal question has been by how far and for how long until price growth slows to a more normal rate of between 5-7%pa over the long term?
- Housing supply falling short of demand – alongside lower construction rates than target and higher than normal population growth, the supply/demand balance remains firmly in the under-supply zone and is set to get worse before it gets better with resources and construction workers being drawn into Government infrastructure projects followed by an acceleration of Olympic construction as we head to 2032.
- Population growth to continue, at a slower rate – net overseas migration peaked at 530,000 in the 2022-23 financial year, placing significant strain on the housing market. The Federal Government has confirmed that for 2025-26, net overseas migration will drop below 500,000 per year although an exact figure has not been announced.
- Infrastructure and Olympics construction – record levels of Government backed infrastructure projects, alongside private and commercial construction initiatives are underway and have been announced for commencement over coming years. These include; housing projects, transport and roads, health, education and, construction specific to the 2023 Olympic games.
- Olympics and major events – in our June article on property prices, we highlighted the long lead in time period for the 2032 Olympics which are just 7 years away. We have recently seen 40,000 fans travel to Brisbane for the British & Irish Lions Tour and other notable major events include the Rugby World Cup in 2027 and the Ashes Cricket Tour in 2025/26. These events use up demand for hotel and short-term accommodation while long tail events like the Olympics also draw on permanent housing stock. Major events also act as a stimulus for overseas and interstate migration both in the lead up to the event as well as post-event.
- Affordability, Lifestyle and Changing Work practices – while property prices have risen sharply in SE Queensland over the past 5 years, relative to Australia’s largest city, Sydney, property in Queensland still represents good value for money. Migration to Queensland continues to be an attractive option for both overseas residents and interstate as people seek the beach and sunshine lifestyle while changes in work practices towards more flexible remote and work-from-home opens up opportunities for people to move to a lifestyle location like Queensland while retaining employment in often higher paying jobs in Sydney and Melbourne or regional and remote opportunities offering fly-in, fly-out employment.
Angus Roxburgh
Buyers Agent
Director