The government has just handed first home buyers what looks like a golden ticket, but it could be the fuse for a ticking time bomb.
Listen to the HotCopper podcast for in-depth discussions and insights on all the biggest headlines from throughout the week. On Spotify, Apple, and more.
From October, the 5% deposit scheme expands with no income cap, no cap on spots, and lifted property price limits. In Sydney, the ceiling rockets from $900,000 to $1.5 million while Melbourne jumps to $950K and Brisbane to $1M. On paper, it’s about helping Aussies into homes, but in practice, it could be laying the foundation for Australia’s own version of the American subprime meltdown.
Let’s be clear, when buyers can borrow up to $1.5M with just a tiny 5% deposit backed by taxpayers, it’s not a housing dream, it’s a debt trap dressed as policy.
And the timing couldn’t be worse. Inflation ticked back up to 2.8% in July, at the very top of the RBA’s range. That’s not “mission accomplished”, it’s a warning light flashing red.
At the same time, our so-called “strong” Australian jobs market is skewed. Employment growth is being propped up by government public sector hires, not private companies investing in expansion.
Strip that away, and the job numbers suddenly look a lot less impressive.
Add in record immigration, and you’ve got an economy kept alive by artificial stimulants, not sustainable growth. When the property market relies on government lifelines and immigration surges, it’s not strong; it’s on life support.
Now picture this: inflation creeps higher, the RBA doesn’t cut rates or worse, is forced to raise them again. At the same time, job cuts like CSL’s 3,000 layoffs ripple through the economy. Households that maxed out borrowing under this scheme suddenly face repayments they can’t afford. That’s exactly how the subprime dominoes fell in the U.S., and we’d be fools to think it can’t happen here.
If you’re going to take advantage of this scheme, don’t treat it like a once-in-a-lifetime sale. This is your first rung on the ladder, not the dream home that bleeds you dry. Buy conservatively, leave a buffer, and avoid maxing out your borrowing.
History is clear: in every bubble, it’s the overleveraged who get crushed first. Don’t be one of them. This isn’t the season for FOMO, it’s the season for caution.
What are the best and worst-performing sectors this week?
The best-performing sectors include Materials, up over 2%, followed by Real Estate, up over 1%, and Energy, up under 0.5%. The worst performing sectors include Information Technology and Communication Services, both down over 2%, followed by Consumer Staples, down over 1.5%.
The best performing stocks in the ASX 100 include IDP Education Limited, up over 26%, followed by Coles, up over 15%, and Worley, up over 13%. The worst-performing stocks include Reece, down over 22%, followed by Telix Pharmaceuticals, down over 18%, and Woolworths Group, down over 14%.
What’s next for the Australian stock market?
This week, the All Ordinaries Index briefly touched a fresh all-time high at 9,322 points, but couldn’t hold the gains, ending Thursday and the week so far only slightly above flat. Given how harsh reporting season has been, some of the ASX’s biggest names have suffered double-digit one-day falls, so the fact that the index hasn’t tanked is a positive sign. Still, what’s clear is that the market has little patience for uncertainty.
Technically, the long-term bull trend remains intact. But with the week closing near where it opened, price action is signalling hesitation. The pattern has all the hallmarks of a market pausing at the top, with a potential reversal on the horizon as early as next week.
If selling pressure emerges, the first level of support sits at 9,000, followed by 8,800. A pullback to 8,800 would represent a modest 4% drop, which is well within normal bounds. Even a deeper dip toward 8,600 is around a 7% drop, which would still be considered typical market behaviour.
If it does turn to fall, expect some short-lived bounces as bargain hunters jump in before sellers reassert themselves and the correction runs its course.
Stepping back, the long-term outlook remains bullish. Any pullback is more like a healthy reset than the end of the rally. Historically, September and October are more bearish before momentum tends to pick up again into November and December. That seasonal pattern aligns perfectly with current price action.
In other words, there’s no need for alarm; just ride out the volatility. The next rise will bring no shortage of opportunities, with plenty of sidelined cash ready to re-enter the market.
For now, good luck and good trading.
Join the discussion: See what’s trending right now on Australia’s largest stock forum and be part of the conversations that move the markets.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in bookstores and online at www.wealthwithin.com.au.
Disclaimer: While Wealth Within holds an Australian Financial Services License (AFSL:226347), the information featured in this program is general in nature and therefore should not be relied upon. Before making any investment decisions, you should consult a licensed professional who can advise whether your investment decisions are appropriate for you.
The material provided in this article is for information only and should not be treated as investment advice. Viewers are encouraged to conduct their own research and consult with a certified financial advisor before making any investment decisions. For full disclaimer information, please click here.