- Government first homeowner grants (FHOGs) have contributed to worsening housing affordability, a new study has found
- PRD research shows FHOGs correlate with price inflation and escalating home loan debts
- The report's findings support other studies that link government homebuyer assistance with driving demand without addressing housing supply
PRD research examined the double-edged nature of the first homeowner grant (FHOG) over the 25 years since its introduction.
The 'First Home Buyer Assistance in Australia' report concluded the grant is a "friend" in terms of policy outcome but also a "foe" given its consequences, as summarised below:
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Source: PRD First Home Buyer Assistance in Australia, 2026
In short, the report concluded while the FHOG successfully boosts first homebuyer participation in the market, it simultaneously contributes to:
- price inflation
- heightened borrowing levels
- worsening housing affordability over time
What is the First Homeowner Grant?
The FHOG was introduced in 2000 to compensate eligible first homebuyers for newly added GST built into the cost of new housing.
The grants are administered by state and territory governments and currently range from $50,000 (the Northern Territory) to $0 (the ACT).
Eligibility rules vary, with some jurisdictions applying price caps while others extend the grants to new or off-the-plan homes only.
See also:
- NSW First Homeowner Grants: A Guide
- Victoria First Homeowner Grants: A Guide
- Queensland First Homeowner Grants: A Guide
- South Australia First Homeowner Grants explained
- Western Australia First Homeowner Grants explained
- Tasmania First Homeowner Grants explained
- Northern Territory First Homeowner Grant explained
More first homebuyers with bigger loans
Since September 2016, the number of first homebuyers entering the market has risen by 34% while the average first homebuyer loan has jumped by 75% - from $320,000 to $560,000.
The study found increases in FHOGs have coincided with substantial rises in first homebuyer loan applications nationally.
Following national grant expansions in 2017, first homebuyer loan commitments rose by around 25% within two quarters.
According to Domain data, median capital city house prices at that time saw a 5% increase from the previous year.
But the strongest response to FHOGs occurred during the pandemic (2020-21) when enhanced grants and the federal government's temporary HomeBuilder grant were introduced.
Between June 2020 and March 2021, first homebuyer loan applications jumped almost 80%.
The 'bring forward' effect
The so-called 'bring forward' effect describes how government grants result in an immediate artificial surge in buyer activity, with many jumping into the market to take advantage sooner than they would have.
The 'bring forward' effect fuels short-term demand rather than long-term housing accessibility and affordability.
The study found first homebuyer grant beneficiaries are usually close to purchasing anyway, and the support is often not effective in helping those who would never have been able to afford a home.
Government schemes fuelling affordability crisis
Multiple property market studies have concluded heated competition for housing has been fuelled, in part, by government schemes.
Most recent attention has been focused on the federal government's expanded 5% Deposit Scheme which has been blamed for escalating home prices, particularly at the lower end of the market.
See also:
- Australia 'most challenging market' for first home buyers
- 5% Deposit Scheme doesn't help affordability, just 'shuffles the deck': Expert
The latest lending data from the Australian Bureau of Statistics showed the number of first homebuyer loans increased 6.8% in the quarter to December 2025, the biggest jump in almost four years.
What was more telling was the 15.5% increase in the total value of new first homebuyer lending over the same period.
Surge in 5% Deposit Scheme lending
In the four months after the expanded 5% Deposit Scheme was launched on 1 October, there was a 75% jump in the number of government guarantees issued compared to the previous four month period, recent government figures show.
The expansion lifted price caps on eligible properties and scrapped income and participant limits.
The figures show almost two-thirds of guarantees had been used to buy a house over the past four months, rather than a townhouse or apartment.
This coincides with the latest Cotality property data that shows the national median house price broke through the $1 million barrier for the first time in February.
Some property industry figures have expressed concern the expanded scheme is being used by those in healthy financial positions to buy bigger properties at the expense of those in greater need of assistance to achieve home ownership.
Other criticism is that it continues to drive housing prices higher by creating more demand without addressing critical supply issues.
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| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
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5.94% p.a. | 5.98% p.a. | $2,978 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
5.89% p.a. | 5.80% p.a. | $2,962 | Principal & Interest | Variable | $0 | $0 | 80% |
| Promoted | Disclosure | ||||||||||
5.99% p.a. | 6.02% p.a. | $2,995 | Principal & Interest | Fixed | $0 | $0 | 60% |
| Promoted | Disclosure | ||||||||||
5.93% p.a. | 5.93% p.a. | $2,975 | Principal & Interest | Variable | $0 | $395 | 70% | Disclosure |
