First home buyer showdown: Labor vs Coalition election housing promises explained

Housing affordability is front and centre this federal election, with both major parties pitching policies to help first home buyers break into the market. But while the goal is shared, Labor and the Coalition are taking very different routes to get there.

So, what’s on offer – and which approach might actually make life easier for someone trying to buy their first home?

Labor’s 5% deposit and supply boost

Labor has promised to expand its First Home Guarantee scheme to make it available to all first home buyers, not just those under certain income or property price thresholds. That means eligible buyers will be able to purchase a home with just a 5 per cent deposit – without having to pay lenders mortgage insurance (LMI).

This could save buyers tens of thousands of dollars upfront. The government is also backing the scheme with a plan to build 100,000 new homes exclusively for first home buyers.

Here’s how a lower deposit requirement might look in practice:

• Property price: $500,000
• 5% deposit: $25,000
• LMI savings: Around $10,000 to $15,000, depending on the lender

The plan is aimed squarely at lowering the barriers to entry, especially for younger buyers who have solid incomes but haven’t been able to save the traditional 20 per cent deposit.

Some economists say the scheme will add to demand and may drive up house prices – but Labor is positioning the new home builds as a response to the broader housing crisis, arguing that supply, not just demand, needs to be addressed.

Coalition’s mortgage tax deduction

The Coalition’s approach puts the focus on ongoing affordability. Under Peter Dutton’s plan, first home buyers who purchase newly built homes would be able to deduct their mortgage interest payments from their taxable income for up to five years.

The scheme applies to the first $650,000 of a mortgage and is available to individuals earning up to $175,000 or couples earning up to $250,000. That’s a sizeable portion of first home buyers.

Here’s a breakdown of how the numbers might stack up:

• Loan amount: $650,000
• Interest rate: 6.1% p.a.
• Yearly interest: Roughly $39,650
• Estimated tax deduction: Up to $12,000 per year, depending on income

For middle to high-income earners, that deduction could mean up to $60,000 in tax savings over five years. The Coalition is banking on this helping buyers manage repayments during the crucial early years of homeownership – without adding to government debt upfront.

Which scheme helps first home buyers more?

That depends on what’s holding you back from buying.

If your biggest hurdle is the deposit or the upfront costs like stamp duty and LMI, Labor’s policy offers more immediate help. By slashing the entry costs and promising new, cheaper housing stock, it could help more people actually get a foot in the door.

If you're more concerned about managing repayments once you're in, the Coalition’s policy could mean tens of thousands in savings over time – especially if you're in a higher tax bracket.

Both policies also have a housing supply angle, though Labor’s is more direct. Its 100,000-home pledge is intended to create new stock for first home buyers, while the Coalition’s incentive is tied to buying new builds only, which could stimulate construction activity more broadly.

Neither policy is a silver bullet, but both represent meaningful attempts to tackle housing affordability from different angles. Labor’s plan is more about getting buyers into homes sooner. The Coalition’s is about giving them a financial leg-up once they’re in.

Which one works better? That might come down to your income, location, and whether you’ve already got a deposit ready to go – or you’re still saving every spare dollar for it.