Australian property investors are poised for substantial gains as both major parties unveil demand-focused housing policies ahead of the May 2025 election. Coupled with RBA interest rate cuts, many economists are forecasting price increases of up to 8-15% within 12 months of implementation, creating prime conditions for strategic investment.
"The combination of aggressive rate cuts and election housing policies is creating a perfect storm for property price growth," says Godfrey Dinh, CEO of Futurerent. "We're anticipating a 15-20% uplift in values in certain markets over the next 12 months, particularly in supply-constrained areas where both parties' policies will drive increased demand."
Key Takeaways for Investors
- Price Growth Forecast: Potential for 8-15% price increases in certain markets within 12 months after policy implementation
- Labor's Approach: Unlimited 5% deposit scheme with no income caps and dramatically increased price thresholds (up to $1.5M in Sydney), plus 100,000 new homes for first-home buyers
- Coalition's Approach: Tax-deductible mortgage interest on first $650,000 of loans for new builds, super withdrawals up to $50,000, and increased income thresholds for guarantee schemes
- Investment Opportunities: New builds will benefit from both policies, with established properties gaining more from Labor's broader approach
The Perfect Storm for Property Investors
Alongside the cost of living, housing has emerged as one of the major policy battlegrounds in the federal election. Property prices have climbed to fresh records despite three years of high interest rates. The cost of renting has also risen sharply since the end of the pandemic, as rapid population growth has exacerbated the nation's existing housing shortage.
With the RBA projected to reduce the cash rate to 3.35% by December 2025, and both major parties unveiling unprecedented housing policies designed to win votes, economists are forecasting substantial price growth that could significantly boost investment returns over the next 12-24 months.
RBA Cash Rate Target
(And pre-COVID averages)
One of Australia's leading housing analysts has forecast prices will rise as much as 15% under the home ownership policies of both Labor and the Coalition.
"They're both inflationary. You need to model this stuff up but for a finger-into-the-wind guess, you would see prices rise 8-15 per cent, 12 months after the policies were enacted," SQM Research managing director Louis Christopher told The Australian Financial Review.
Former Reserve Bank of Australia governor Ian Macfarlane has echoed these concerns, stating bluntly that both parties' policies would push up demand for housing and cause prices to rise. "They are stoking up the demand side, which will mainly show up in higher prices," Macfarlane said.
Economists consistently point out that neither side's policies would meaningfully boost supply in the short term while both packages would significantly increase housing demand – a combination that historically leads to price appreciation and creates prime conditions for strategic property investment.
Labor's Housing Policies
Prime Minister Anthony Albanese will use Labor's campaign launch in Perth to announce a dramatic expansion of the federal government's first home guarantee scheme, alongside a substantial investment in new housing stock.
Expanded First Home Guarantee Scheme
Labor's policy will allow all first-home buyers to enter the property market with just a 5% deposit from January 2026. The federal government will guarantee another 15% of the purchase price, enabling buyers to avoid lenders mortgage insurance, which typically costs around $23,000 for the average first-home buyer.
This represents a significant expansion of the existing scheme introduced by the Morrison government in January 2020. Currently, about one in three first-home buyers use the guarantee, according to Housing Australia.
Albanese's plan would dramatically transform the program by:
- Abolishing the $125,000 income limit for eligibility
- Making the program available to an unlimited number of applicants instead of just 35,000 per year
- Substantially increasing property price caps to $1.5 million in Sydney, $950,000 in Melbourne, $1 million in Brisbane and Canberra, $850,000 in Perth, $900,000 in Adelaide, and $700,000 in Hobart
The cost to taxpayers is effectively minimal unless the first-home buyer defaults and their property has fallen in value, which is historically rare.
New Housing Construction
To counter criticism that the expanded guarantee scheme will simply inflate prices, Labor has also pledged $10 billion to build up to 100,000 homes over eight years that will be exclusively available to first-home buyers.
This comes as Labor is already struggling to meet its existing commitment for 1.2 million homes over five years, raising questions about the feasibility of additional construction targets in an economy facing labour shortages and supply constraints.
Additional elements of Labor's housing policy include:
- Continuation of the shared equity scheme where the government will co-buy properties with individuals
- A $2 billion Housing Support Program for essential infrastructure
- $54 million for prefabricated and modular home construction
Quick Take: Labor's approach focuses on broadening access to the housing market through an unlimited guarantee scheme with no income caps and dramatically increased price thresholds. By removing the deposit barrier for all first-home buyers while simultaneously investing $10 billion to build 100,000 new homes, Labor aims to address both demand and supply sides of the affordability equation. However, economists warn this broad-based approach will likely drive stronger price growth across the entire market, particularly benefiting those with smaller deposits but potentially worsening affordability in the long term.
Coalition's Housing Policies
Opposition Leader Peter Dutton has escalated the political battle over housing affordability with a suite of policies centred around tax deductibility for mortgage interest – an unprecedented approach in Australia.
Tax-Deductible Mortgages
The Coalition's flagship policy would enable first-home buyers to deduct against their taxable income interest paid on the first $650,000 of a mortgage for a newly built home for five years.
While there is no cap on the overall mortgage size or home price, only the interest on the first $650,000 of the loan will qualify for deductions. The scheme will be means-tested and limited to individuals earning up to $175,000 and couples with combined incomes of up to $250,000.
Dutton claims an average family will save about $11,000 a year, or $55,000 over the five years under this scheme. For individuals in the 30% tax bracket, the maximum deduction they could receive is about $12,000 per year or $60,000 over five years, based on a variable mortgage interest rate of 6.1%.
The benefits are even greater for higher income earners. A household with one worker earning $250,000 on a 47% marginal tax rate (including 2% Medicare levy) will save up to $18,992 a year on income tax, while a worker earning $95,000 paying a 32% income tax rate will save $12,931, according to Labor's analysis.
Supply-Side Focus
Shadow Housing Minister Michael Sukkar has emphasised that the tax deduction would be limited to new dwellings to encourage supply. "In Australia, you only get a new house built if someone is prepared to commit," he said. "The way you unlock supply is encourage someone to pre-commit to a new dwelling."
This approach is complemented by the Coalition's other housing policies, including:
- Increased income caps for the home guarantee scheme from $125,000 to $175,000 for singles and from $200,000 to $250,000 for couples
- Removal of caps on the number of places under the scheme
- Access to up to $50,000 from superannuation for first-home buyers
- Potential reduction in the APRA loan serviceability buffer from 3% to 2.5%, which according to NAB modelling would increase borrowing capacity for a person earning $125,000 with $5,000 in credit card debt from $587,000 to $613,000
- A $5 billion investment to unlock 500,000 new homes through infrastructure funding
Coalition's Migration and Foreign Investment Policies
The Coalition has committed to reducing Australia's permanent migration intake by 25%, from 180,000 to 135,000 places per year, though the specific visa categories affected will be detailed after the election. Importantly, Opposition Leader Peter Dutton has stated that the annual parent visa intake will remain unchanged, emphasising the link between migration levels and housing affordability for young Australians.
In addition, the Coalition will implement a two-year ban on foreign investors and temporary residents purchasing existing homes, effective from 1 April 2025 to 31 March 2027. This policy is designed to make more established properties available to local buyers, while still allowing foreign investment in new housing developments to support supply growth. The effectiveness of the ban will be reviewed after two years.
Quick Take: The Coalition's strategy centres on tax deductibility for mortgage interest—an unprecedented approach in Australia—alongside migration cuts and foreign investor restrictions. By limiting benefits to new builds and higher income earners, the policy aims to stimulate construction while managing demand. The approach provides greater benefits to those in higher tax brackets and focuses on supply-side solutions, but critics argue the combined "sugar hit" of incentives will primarily benefit developers and existing homeowners while potentially driving up prices in the new-build segment of the market.
Investment Implications by Property Type
New Builds vs Established Properties
Dan White, the head of Ray White Group, Australia's largest real estate agency, offered a clear analysis of the potential impact: "The Labor policy is far more broad-based. It will impact prices more. The Coalition policies only apply to new stock. New stock is only a fraction of the overall market."
For investors deciding between new and established properties:
- New Builds: Will benefit from both parties' policies, with the Coalition offering stronger incentives through tax deductibility
- Established Properties: Will see greater price growth under Labor's policies due to the broader application of the guarantee scheme
Regional vs Metropolitan Investments
Oxford Economics Australia's lead economist, Maree Kilroy, warned of a "sugar hit" from Coalition policies that would combine several first-home buyer incentives.
"When combined, the earmarked policy suite revealed by the Coalition is very generous," Kilroy said. "Taken together, [they] are an enormous sugar hit that will turbocharge demand from first home buyers for new dwellings."
This suggests metropolitan areas with new housing developments could see particularly strong growth under Coalition policies, while Labor's broader approach may benefit established suburbs and regional centres more evenly.
Who Benefits Most From Each Party's Policies?
The different approaches by each party will benefit different segments of the market:
Coalition policies will favour higher-income earners who can already qualify for home loans but can now borrow more due to the tax break. For individuals in the 30% tax bracket, the maximum deduction they could receive from the mortgage interest deductibility is about $12,000 per year or $60,000 over five years, based on a variable mortgage interest rate of 6.1%. The benefits are even greater for higher income earners - a household with one worker earning $250,000 on a 47% marginal tax rate (including 2% Medicare levy) will save up to $18,992 a year on income tax, while a worker earning $95,000 paying a 32% income tax rate will save $12,931, according to Labor's analysis.
Labor policies will benefit those with smaller deposits through the expanded guarantee scheme.
As former prudential regulator John Trowbridge noted: "If I needed lenders' mortgage insurance, I would be more attracted to the Labor one. If a first home buyer with a larger deposit didn't need mortgage insurance, they would certainly be more attracted to the Liberal policy of five-year tax deductibility."
The cost savings for buyers under Labor's expanded guarantee scheme are substantial – about $26,888 for a person with a 5% deposit on a median-priced apartment of $670,000, according to Canstar.
Expert Criticism
Economists are almost universally sceptical of subsidies targeted at first-home buyers, citing a wealth of evidence showing they simply increase prices without improving affordability.
Former Treasury economist Steven Hamilton has stated: "Given highly inelastic housing supply, a big demand subsidy pushes up prices, which pushes up the average mortgage for a first home buyer buying a new dwelling."
Critics argue that both parties are offering "sugar hits" to win votes while potentially worsening the housing affordability crisis in the long term. As one financial commentator put it, these policies "will fuel even higher prices and cause first home buyers to take on more risky debt levels."
Supply Constraints Continue
Despite the focus on boosting demand through buyer incentives, Australia's housing supply shortfall continues to worsen:
Recent Australian Bureau of Statistics figures show that in the December quarter 2024:
- Standalone house starts dropped 6% to a seasonally adjusted 26,549
- Commencements of apartments, townhouses, and semi-detached homes fell 1.5% to 15,217
- Total new home starts declined 4.4% to 41,911
This production level falls significantly short of what's needed, according to HSBC chief economist for Australia and New Zealand, Paul Bloxham: "We're not building enough homes. On the current flow of new households you need to have about 200,000 dwellings being built. This is about 20% below where it needs to be."
Bloxham also noted the implications for property prices: "Any measures you introduce that boost demand rather than supply are likely to lead to higher housing prices than fixing the underlying housing affordability problem."
Historical Property Performance Under Different Governments
An analysis of CoreLogic data over the past 35 years shows that property values have performed significantly better under Coalition governments:
- House prices across Australia have jumped about 8.8% per year on average under Liberal prime ministers
- Under Labor governments, annual price growth has averaged just 2.5%
- The strongest period of growth was during John Howard's 11½ years in power, when average house prices surged 13.1% per year
While government policies do influence property values, Tim Lawless, executive research director at CoreLogic Asia-Pacific, notes that broader economic factors play a major role: "Interest rates, economic conditions, credit availability, population growth and the level of housing supply available at times of population growth, and shocks are the biggest drivers of house prices."
Market Outlook
"The combination of aggressive rate cuts and election housing policies is creating a perfect storm for property price growth," says Godfrey Dinh, CEO of Futurerent. "We're anticipating a 15-20% uplift in values in certain markets over the next 12 months, particularly in supply-constrained areas where both parties' policies will drive increased demand."
As the election campaign intensifies, property prices have already climbed to fresh records despite three years of high interest rates. The cost of renting has also risen sharply since the end of the pandemic, as rapid population growth has exacerbated the nation's existing housing shortage.
With both major parties focused on demand-side solutions rather than addressing the fundamental supply constraints, the outlook for genuine housing affordability improvements remains challenging, regardless of which party forms government after the May 2025 election. For property investors, however, these conditions create significant opportunities for capital growth in the short to medium term.
Both parties have used their Sunday campaign launches to reveal significant spending policies in a bid to grab voters' attention before the campaign moves into a period of back-to-back long weekends.
For savvy property investors, the coming months could represent a crucial window to position portfolios ahead of what could be one of the strongest periods of price growth in recent years.
How Futurerent Can Help
As both major parties propose policies that many economists predict will drive property prices higher, strategic investors are positioning themselves to capitalise on these opportunities before they fully materialise in the market.
Futurerent enables property investors to:
- Access up to $100,000 per property (maximum $500,000 across your portfolio)
- Move quickly to secure properties before election policies potentially drive increased competition
- Fund strategic renovations to maximise returns in a changing market
- Maintain financial flexibility as policy and market conditions evolve
Contact our team today to discuss how we can support you in light of the upcoming election and its potential impact on the property market.
