Could This Government Scheme Unravel The Property Market?

DG Institute
DG Institute

Published 2:58 am 27 Aug 2021

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What goes up, must come down. But few would have predicted that a Government scheme could be the cause for the slowdown of Australia’s property market.  

Over the past 25 years, the average annual growth rate of the Australian property market has been roughly 6.8% for houses and 5.9% for units. However, as many will know, the past 12 months have bucked this trend, with economists and experts predicting that parts of Australia’s housing market could see increases above 20 percent this year. 

The parabolic rate of growth of Australia’s property market has meant that even if you occupy one of the highest-paying professions in Australia, house values in Sydney and Canberra are out-earning your salary each quarter. 

Against the backdrop of low mortgage rates, wages going backward, and 20% capital gains to be made, Australians have had little reason not to try to get a foot in the door of this property market. 

Though experts generally seem to agree; this rate of property market growth cannot continue in 2022

Oversupply of properties

The laws of supply and demand largely dictate how Australia’s housing market will be priced, and up until this point, the low supply of housing combined with increased demand for Australian property has helped to cause the very boom we are seeing currently.

However, the supply and demand surrounding Australian property might both be about to flip. 

In an effort to stimulate the economy amid COVID-19 and to combat the undersupply of properties in Australia, the Australian government implemented the HomeBuilder Grant, which provided a $15,000-$25,000 grant to build a new home, substantially renovate an existing home or buy an off the plan home/new home.

The Government’s goal of stimulating construction activity was a success, resulting in the biggest quarterly contribution by residential construction since 2003 at the beginning of 2021, and a record 136,600 single home approvals during the 20-21 financial year – a 31% increase over the prior financial year.

According to the Federal Treasurer Josh Frydenberg, “HomeBuilder has created a pipeline of residential construction work, with commencements for new private homes the highest since the data series began in 1965.”


As this boom in housing construction comes at a time when Australia’s borders are largely closed, some experts speculate that this could create an oversupply of homes

Tim Toohey, the head of macroeconomic strategy at Yarra Capital has said that the HomeBuilder Grant scheme could see 150,000 more homes built than required by 2023.

Going into Covid-19 we had a little bit of a shortage, but that will turn into significant oversupply,” Mr Toohey said.

“The penny hasn’t dropped, but when it does it will take the heat out of house prices.”

Affordability Crisis  

On top of a potential oversupply of houses, polling data from Westpac’s “time to buy a dwelling index” revealed that plans to buy a house has reached the second-lowest point for Australians since 2010.

The index dropped 14.1 percent over the three months leading up to August, and the previous three months fell at a similar rate.

“…markets are entering very tricky territory as… major virus disruptions combine with… an extraordinary boom that is starting to run into affordability constraints,” said the report. 

This decline in positive sentiment toward the market can also be seen in the slowing price growth of Australia’s capital city property market, which is most prevalent in Sydney and Melbourne. 

Sydney’s quarterly price growth peaked at 9.6% in mid-May but has since slowed to 6.9% as of the 25th August. Melbourne’s quarterly price growth peaked at 6.3% in mid-May but has since slowed to 4.1% as of the 25th of August.


According to CoreLogic’s research director Tim Lawless, the slowdown in the price growth of the property market can be largely attributed to the growing issue of affordability. 

“With dwelling values rising more in a month than incomes are rising in a year, housing is moving out of reach for many members of the community,” Lawless said. “Along with declining home affordability, much of the earlier COVID related fiscal support — particularly fiscal support related to housing — has expired.”

The belief that Australia’s property market will slow is held by banks like Westpac and NAB, who have said that “affordability constraints will likely begin to bind over the year and see a slowing in price growth as the impact of lower rates fade.”

The end of Australia’s housing boom?

It’s clear that a combination of factors will coincide to curb the growth of Australia’s housing market over 2022-2023. 

Limited overseas migration, a potential oversupply of houses, and the increasing unaffordability of property will all act as obstacles for the continued rate of growth of the property market. 

As such, investors shouldn’t expect the 15-20% growth in 2022 that we’re seeing this year, but should instead temper their expectations given the aforementioned factors at play. 

However, this is not to say that there will be a housing market crash, but rather a slowed rate of growth over the next year. Furthermore, there may be unique opportunities on the horizon for those involved in, or looking to get into the property market. 

For example, as we look toward a future with a majority of Australians having been double vaccinated and borders reopening to overseas migration, a reinvigoration of the rental market is certainly on the horizon. 

Additionally, if you focus on small property developments, you can free yourself from the fluctuations of the market almost entirely, and manufacture your own capital gains. 

A risk and an opportunity 

Despite the strong growth we’ve seen in Australia’s property market this year, success in the property market is not guaranteed, and a lot of people will come up short because they are unaware of the broad spectrum of influences upon the market and how to correctly leverage them.  

That’s why it is so important that you have the right knowledge, support and systems to help guide you through the current market conditions, while safeguarding you against potential downsides. 

You can learn all of this and more at our events. If you missed our last Property Success Summit, you can catch a recap here.

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Lawyer, Asset Protection Specialist and Property Educator

Dominique Grubisa is a practicing lawyer with over 25 years experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author.

This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

About DG Institute

Founded in 2009, DG Institute strives to empower everyday Australians to grow and protect their wealth. Our goal is to provide direction, motivation and inspiration to our clients and help them perform at their very best. We do that through our professional services, in addition to teaching them how to grow their wealth through property and business education.

This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

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