Liberal vs Labor: What the Latest Housing Policies Mean for First Home Buyers

Prior to the election, both major parties unveiled housing policy updates that could significantly affect first home buyers. While both policies aim to support Australians in getting onto the property ladder, their approaches — and effectiveness — vary considerably. Here’s a breakdown of what was announced, who it impacts, and what it really means if you're trying to buy your first home.

🔵 Liberal’s Proposal: Tax Deductibility for New Builds

The Liberal party’s proposed policy allows eligible first home buyers to deduct up to $650,000 of their mortgage from their taxable income — but only on new builds. Using rough assumptions (6% interest, $650k loan, 30% tax bracket), that’s an approximate tax saving of $11,700 per year.

Pros:

• A potential $12,000 in annual take-home income increase.

• Targets affordability via tax relief.

Cons:

• Means-tested: Singles earning over $175k or couples over $250k are excluded, despite many high-income earners still struggling with affordability.

• Restricted to new builds, which are often either:

  • Apartments in high-density areas with low capital growth and high body corp fees.

  • House-and-land packages on the outer fringes — far from transport and infrastructure.

This policy, while attractive on paper, may not be practical for many first-time buyers. It doesn’t reduce upfront costs or deposits, and applies narrowly to property types that aren't in high demand.

🔴 Labor’s Proposal: Expanding the First Home Guarantee

Labor’s policy builds on an existing scheme: the First Home Guarantee. It allows buyers to purchase with just a 5% deposit, and the government guarantees the remaining 15% to eliminate LMI and secure better loan terms.

Key improvements:

• Scraps income caps, which previously excluded many buyers with strong incomes but little savings.

• Increases property price caps:

  • Sydney: $900k → $1.5M

  • Melbourne: $800k → $950k

  • Brisbane: $850k → $1M
    (Full list in the transcript)

Standout Concern:

• Melbourne’s new cap of $950k misses the mark. In this market, many first home buyers need to spend $1M–$1.3M for a practical, livable home near the city. The current cap doesn’t reflect this reality.

Despite this, the Labor plan more directly addresses entry barriers like deposit requirements and upfront costs — a major hurdle for first home buyers.

🎯 The Bigger Picture

Both policies aim to make housing more accessible, but neither addresses affordability in a meaningful way. In fact, by increasing borrowing capacity, they may inadvertently push prices higher.

However, helping people get into the market sooner remains a net positive. Long-term studies show homeownership significantly improves financial security. Between the two, Labor’s plan more effectively reduces the biggest barrier: saving the deposit.

Bottom Line: These are both steps in the right direction, but we need to stop confusing "helping people buy homes" with "solving the affordability crisis." They’re not the same.