Dean Smith: Home guarantee scheme pours petrol on housing market fire

The Albanese Government flicked the switch on what it calls an “expansion” of the Home Guarantee Scheme on October 1.

It is no overstatement that this is one of the most reckless housing policy changes in a generation — a decision that risks locking young West Australians out of home ownership for years to come.

Unlimited places, higher price caps and no means testing.

These changes may sound like support for first home buyers, but in truth they are the policy equivalent of pouring petrol on a fire.

In a housing market already crippled by chronic undersupply, Labor’s scheme will supercharge demand, push home prices higher, and leave more people unable to enter the market.

The predictions are not speculative, either.

The data is clear: Perth’s housing market is already under extraordinary pressure.

At the end of August, there were just 2981 homes listed for sale — an 18.3 per cent fall from the year before.

By September, the number had slipped further to 2905, the lowest in more than a decade.

When supply collapses, prices rise, and that is exactly what is happening.

According to Cotality’s Home Value Index, Perth house prices jumped 3.1 per cent in the August quarter alone — more than double Melbourne’s 1.3 per cent.

The city’s median house price now sits at $881,857, and on current trends will reach $1 million far sooner than the five-year forecast predicted earlier this year.

This pressure is not confined to the metropolitan area, either.

Programs that only fuel demand cannot deliver affordability.

In Albany, for example, the median house price has surged 18.4 per cent over the past year to $650,379.

Raising the regional scheme cap from $450,000 to $600,000 will only invite more buyers into markets that do not have the stock to cope, pushing prices even higher.

For young West Australians trying to save, this is devastating.

Every month the deposit hurdle grows harder to jump, while rents continue to climb.

Young professionals are being forced into long-term rentals because saving a deposit is near impossible when rents themselves are skyrocketing.

Families attend inspections only to find themselves competing against dozens of others for the same limited stock.

Parents watch as their children despair over never owning a home in the city where they grew up.

And there are longer term consequences.

The expanded Home Guarantee Scheme also risks distorting the market in ways that will take years to unwind.

Allowing buyers to enter the market with just a 5 per cent deposit and a government guarantee on the remaining 15 per cent may sound appealing, but it pushes more households into large mortgages at a time when interest rates and the cost of living are biting.

The number of first home loans is now at its lowest level in five years, yet this policy injects thousands of additional buyers into an environment where supply cannot keep pace.

Most significantly, the scheme’s expansion does nothing to address the root cause — supply.

Instead of capping the number of guarantees each year, Labor has now made them open ended — meaning there is effectively no limit on how many extra buyers can enter the market at once.

But not a single extra home is being built to match this surge in demand.

Raising the Perth price cap to $850,000 arms buyers with bigger budgets, which sellers inevitably factor in.

Scrapping means testing extends eligibility to high-income earners who don’t need taxpayer support but will now compete directly with aspiring market entrants.

The result is predictable: too many buyers chasing too few homes.

And the losers are the very people this policy is supposed to help.

History shows what happens when governments pump up demand without fixing supply.

During the pandemic, the previous Coalition government’s HomeBuilder program briefly turbocharged construction — but it was targeted, temporary, and designed as stimulus in an economic emergency.

Labor’s expansion of the Home Guarantee Scheme is none of these things. It is permanent, wide-open, and poorly targeted.

The winners will be sellers and banks.

Sellers will pocket bigger profits, while banks grow their mortgage books with government-backed loans.

The losers will be young people across WA who find themselves pushed further away from their first home.

The Albanese Government had options.

The most obvious was prioritising policies that increase supply — unlocking more land, fast-tracking approvals, supporting build-to-rent projects, and funding infrastructure to enable housing growth.

Instead, it opted for a more politically beneficial headline of “helping buyers”.

Behind every statistic lies a story: a young couple in Perth, priced out week after week as bidding wars intensify; a single parent in Rockingham hit with another rent rise, unable to save while competing with high-income earners newly eligible under the expanded rules; a family in Albany, told the higher regional cap will “help,” only to find themselves facing more outside competition for the same few homes.

These are the lived realities of West Australians, repeated across the State.

They reflect a generation increasingly at risk of permanent exclusion from homeownership — with all the inequality and loss of opportunity that brings.

Housing is not just about economics. It is about dignity, stability, and the promise of opportunity. Every West Australian deserves a fair chance at owning their own home.

But affordability cannot be restored by simply adding more buyers into the mix.

It requires a serious, co-ordinated effort to increase the supply of homes across both metropolitan and regional WA.

If we want to restore the promise of homeownership, we need to start with honesty.

Programs that only fuel demand cannot deliver affordability.

What is needed instead is a sustained focus on boosting supply — making more land available, enabling more diverse housing options, and ensuring communities have the infrastructure to grow alongside new development.

Without that, today’s changes will leave tomorrow’s buyers facing even higher barriers, and the dream of homeownership will slip further out of reach for thousands of West Australians.

Dean Smith is a Liberal Senator for WA