Lower-priced homes across Australia are recording stronger value growth than more expensive properties, with new analysis pointing to the expanded Home Guarantee Scheme as a key driver of the shift. Research from Cotality shows that since September last year, housing markets have increasingly diverged based on whether properties fall under or above the scheme’s revised price caps.

During the December quarter, homes priced below the caps rose by 3.6 per cent, compared with growth of 2.4 per cent for homes above the thresholds. The data suggests that demand has become more concentrated at the lower end of the market as buyers respond to the expanded five per cent deposit guarantee.

Cotality research director Tim Lawless said the policy change has sharpened competition in more affordable segments. He noted that under-cap markets have outperformed in almost nine in ten regions, with the shift particularly evident in Sydney where the price gap between eligible and ineligible homes is most pronounced. According to Lawless, some of this momentum was already visible before the scheme officially began on October 1, indicating that buyers moved early to secure properties before demand intensified.

Photo by Esther Zheng

Several factors appear to be reinforcing the trend. Anticipation of higher competition following the scheme’s launch likely brought some demand forward, even from buyers who did not strictly need to rely on the deposit guarantee. At the same time, elevated interest rates and tighter serviceability limits are pushing many purchasers towards lower-priced and more affordable homes. Investor activity is also playing a role, with investors accounting for 41 per cent of mortgage demand in the third quarter and annual investor credit growth accelerating at its fastest pace since December 2015.

Regionally, stronger growth below the price caps has been recorded in every capital city and regional market except the ACT. Sydney showed the most pronounced divergence, with under-cap homes rising by 2.3 per cent over the December quarter while properties above the cap slipped by 0.1 per cent. Nationally, 78 of the 88 SA4 sub-regions analysed, representing 89 per cent of the total, recorded faster growth for homes priced under the caps.

Overall, the findings suggest the expanded deposit guarantee has amplified demand for lower-priced housing, helping this segment outpace the rest of the market at a time when affordability pressures remain high.