Last week’s federal budget introduced key housing measures, including an expansion of Labor’s Help to Buy scheme aimed at helping first-home buyers get onto the property ladder.

With an additional $800 million allocated, this shared equity initiative allows eligible buyers to purchase a home with a smaller deposit and lower mortgage.

While the scheme is designed to improve affordability, mortgage broker Chris Bates, co-founder and CEO of Alcove, warned it could have unintended consequences.

Will this scheme genuinely help Gen Z and Millennials enter the market?

Bates said Help to Buy had the potential to assist some first-home buyers who might not have been able to purchase independently.

However, he highlighted a critical downside:

“Depending on the election result in the coming months, if this policy sticks around, it will increase demand by attracting future buyers to today and helping some first-time home buyers who may not have been able to buy a better asset than they could have alone,” he said

“Any demand-increasing policy usually leads to higher prices in the short and long term – so it only further creates issues down the line with affordability.”

Real winners and losers: Will it ease affordability pressures?

With housing supply already constrained, a demand-boosting policy like Help to Buy risks further inflating property prices.

That said, Bates suggested the overall impact may not be highly inflationary in the short term.

“From first glance, it doesn’t seem highly inflationary, and overall inflation expectations are looking better, not worse, in the coming months,” he said.

“That will likely lead to a higher likelihood that property owners’ biggest cost – their mortgage – can be reduced further.”

If inflation stabilises and interest rates ease, mortgage holders could benefit from lower repayments.

However, affordability concerns for new buyers may persist due to continued upward pressure on property prices.

Buy a home or invest first: What’s the smarter strategy?

For young Australians debating whether to buy a home or invest in property first, Bates urged careful consideration.

“While buying an investment rather than a home often feels easier, there are challenges with investing without purchasing a home first,” he said.

“You may be able to outrun growth [over choosing] a principal place of residence, if you get it right. But it is often hard after paying all costs, such as buying, selling, and capital gains tax.”

He said the opportunity cost of not owning a tax-free appreciating home could outweigh potential investment gains.

Bates’ most important advice?

“Buyers should weigh their options carefully, considering both market conditions and long-term financial goals.”

This article first appeared on View.com.au. Read the original here