How Labor and the Coalition’s pitches to first home buyers compare

Two campaign launches, two different housing policies targeted squarely at Australians hoping to take their first step onto the property ladder. 

Both Labor and the Coalition capped off the second week of the campaign with policy announcements they say will make it easier for Australians to buy their first home, setting up a direct contest over housing ahead of the May 3 poll. 

But while the major parties have the same stated goal, the path they have chosen to get there is very different. 

Here are the housing policies both sides announced over the weekend and what it could mean for you.

The Coalition’s plan

Coalition Leader Peter Dutton has vowed to allow first time buyers of newly built homes to deduct part of the interest paid on their mortgage from their income taxes if he is elected.

Access to the “first home buyers mortgage deduction scheme”, as it has been called, is limited to five years and participants would only be able to claim back the interest paid on the first $650,000 of their mortgage.

There is no limit to the purchase price of the house or apartment, nor the size of the mortgage.

How much that will net someone each year is highly dependent on the size of their mortgage, the interest rate, whether some of their mortgage is offset, their income and any other deductions. 

As an example, a family on average incomes could be about $12,000 a year better off.

But not everyone will be eligible. 

The scheme will be means-tested at $175,000 for singles and $250,000 for couples (once they’ve accessed it, recipients will still be able to access the deductions if their pay goes up) and only available while the recipient is living in the home.

As noted above, it will also only apply when the property in question is a new build — meaning no one has lived in it previously — a detail the Coalition claims will boost construction activity and housing supply.

It is anticipated to cost $1.25 billion over the forward estimates, but the true cost will ultimately depend on how many people take it up. 

When will it be available?

The Coalition plans to introduce legislation for the scheme within 100 days of being in government, if they win the coming election.

There would be no application process to access it. 

At tax time, recipients would claim the additional deductions like they would for other work-related expenses.

The Coalition intends for the changes to be permanent. 

Labor’s plan

Prime Minister Anthony Albanese’s announcement on Saturday included two parts: 5 per cent deposits for all first home buyers and a $10 billion pledge to go towards building 100,000 new homes that will be available only to that cohort. 

Let’s look at part one first. 

Typically, you need a 20 per cent deposit to buy a house, otherwise buyers are required to purchase Lenders’ Mortgage Insurance, which can add thousands onto the cost of buying a home.

Under an existing Labor scheme, called the First Home Buyers Guarantee, the government effectively acts as a guarantor on the loan, doing away with the need for insurance.

But that is only available to first home buyers who earn less than $125,000 a year for singles or $200,000 a year combined for couples and its places are limited. 

At present, about 50,000 people access it every year.

Labor’s new plan is to expand that scheme to all first home buyers, doing away with the income test and cap on availability. 

They expect this to bring the number of people accessing it each year to 80,000, based on Treasury estimates.

The only restriction would be on the price of the home, which would be capped relative to the average for each city or region.

This is a higher cap than under the current scheme, which is set at the median house price (averages are generally higher).

In Sydney, the limit is currently $900,000, but would be $1.5 million under the new proposal. And in Melbourne, it’s currently $800,000 but would be $950,000. 

You can see the limit for each city in the table below.

The second part of the plan seeks to tackle the supply side of the equation. 

Labor has promised to spend $10 billion to help build 100,000 new homes that would only be available to first home buyers. Of this, $2 billion would be grants and $8 billion would be zero-interest loans or equity investments — mostly to states and territories.

According to Labor, the Commonwealth will work with the states and territories to identify underused government land and fast-track development applications. 

The resulting homes would be cheaper than what’s available than those built by the private sector, Housing Minister Clare O’Neil said on Sunday.

It’s so far unclear who will be able to access the homes, beyond the baseline requirement that it will only go to people who have never purchased property. 

Ms O’Neil said it was likely there would be some income test, but that the exact criteria would be negotiated state by state. 

The government’s Housing Australia Future Fund, set up in this term of parliament to fund the construction of social and affordable times, has taken longer to finalise contracts and commence construction than the government had initially hoped and has yet to lead to any constructed homes.

When will it be available?

Labor hopes to have construction projects begin in the 2026-27 financial year (starting in the middle of next year), with homes complete by the following year — but Ms O’Neil said it would take eight years to reach the full 100,000 target. 

But the timeline will ultimately depend on the passage of legislation and the speed at which suitable locations can be identified.

The expansion First Home Buyers Guarantee will be implemented on the first day of next year if Labor is re-elected, following further consultation with industry. 

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