A mixed reception has greeted a newly-implemented scheme to help young Australians shave years off the time to break into the property market but could also drive up house prices.
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Labor's five per cent deposit scheme took effect on Wednesday, allowing eligible first-home buyers to get a mortgage with a much smaller deposit and avoid paying for lenders' mortgage insurance.
Some analysts argue the measure will add demand to a hot property market.
The Insurance Council has previously warned it could push up the cost of a home by as much as 10 per cent in the first year.
Treasury modelling suggests the impact will be much smaller at just 0.5 per cent over six years.
But economists, such as CBA's Harry Ottley, said the impact would be more acute on the lower end of the market, where the scheme is targeted.
The prime minister argues the scheme, which was an election campaign promise, will have a minimal impact on prices, but will level the playing field between first-home buyers and investors.
"What that will do is allow more young people in particular to get into their first home," Anthony Albanese told reporters in Sydney on Wednesday.
"We want more Australians to realise the dream of home ownership."
Analysis by online property marketplace Domain found the initiative would slash the time to save for a deposit in Sydney, for example, from almost 11 years to less than three years.
Homebuyers in Melbourne and Brisbane will save five years and nine months, while Adelaide purchasers will have the deposit hurdle lowered by five years and seven months.
"This is life changing stuff and a genuine expansion of home ownership opportunities for that generation of Australians who are facing such a different housing market than their parents and grandparents faced," Housing Minister Clare O'Neil said.
But a lower up-front deposit meant more debt overall and a higher risk of slipping into negative equity if prices fell, noted Domain chief economist Nicola Powell.
The government believes tens of thousands of home buyers will take advantage of the scheme in its first year.
Centre for Independent Studies chief economist Peter Tulip was concerned about first-home buyers racking up too much debt.
"It does address a real problem, but it does so in a fairly risky, dangerous way," he told ABC TV.
"It's going to encourage people to take one-way bets on the housing market."
Opposition housing spokesman Andrew Bragg criticised Labor's decision to scrap income eligibility caps, arguing it opened the scheme up to the children of billionaires.
"It is a dark day for first-home buyers and the Australian dream," he said.
"By scrapping income caps, Labor has saddled taxpayers with a $60 billion contingent liability while stoking demand and driving prices higher."
Labor insists its home deposit scheme should be seen as one of a number of housing policies, which also include billions of dollars in funding to increase supply and working with state governments to streamline planning regimes.
"We've got a very ambitious plan to hit that target (of 1.2 million new homes over five years)," Treasurer Jim Chalmers said.
Speaking after the Reserve Bank kept interest rates on hold on Tuesday, governor Michele Bullock said the measures would take at least two years before they start to have any impact on affordability.
The median Australian property value climbed to $857,280 in September, a jump of 0.8 per cent, property analytics firm Cotality reported in its monthly home value index on Wednesday.
Australian Associated Press
