States pause construction code as deposit scheme kicks in and home prices hit record high

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State and territory leaders have agreed to pause and streamline the National Construction Code in a bid to boost supply as the government’s 5 per cent deposit scheme kicks in, rekindling concerns about record-high housing prices.

This month, the federal government’s deposit scheme – which covers the lenders mortgage insurance imposed by lenders on all first homebuyers who have a deposit of less than 20 per cent of a property’s sale price, but more than 5 per cent – came into effect after it brought forward the start date to October 1.

The increase in buyer activity and higher prices are partly a response to falling interest rates.

The latest Domain House Price Report, released on Thursday, shows Sydney’s median house price climbed 6.3 per cent, or $104,140, over the year to September, hitting a fresh record of $1.75 million. Property prices in Melbourne rose by 6.2 per cent while they surged 10 per cent in Brisbane, Adelaide and Perth.

Cotality’s daily capital city dwelling value index shows property values have continued to grow, climbing 1 per cent from September to October in Sydney and Melbourne.

The increase in buyer activity and higher prices are partly a response to interest rates which have fallen from a peak of 4.35 per cent in December to 3.6 per cent in October.

But the 5 per cent deposit policy, which is aimed at getting more first homebuyers into their first home by removing the need to pay lenders mortgage insurance which can cost thousands of dollars, has also drawn criticism from some economists and experts who say it pushes up property prices by dragging forward demand.

Real Estate Institute of Australia president Leanne Pilkington says the expansion of the First Home Guarantee Scheme – including the government’s decisions in August to remove the cap on the number of applications which would be accepted and lift the price tag of properties eligible for the scheme – had increased first-home buyer confidence to enter the market sooner.

“It’s provided a useful leg-up to more buyers who might otherwise have struggled to save a full deposit, but they can also place some upward pressure on prices in segments of the market,” she says. “To make a lasting impact on affordability, demand-side measures need to be matched with strong supply side policies that deliver more homes to the market.”

On Wednesday, state and territory building ministers came together to endorse and agree to pausing and streamlining the National Construction Code (NCC) – a recommendation which received broad support at Treasurer Jim Chalmers’ economic reform roundtable in August.

The NCC, a 3000-page document which is updated every three years, lays out the requirements and standards for constructing buildings in Australia. The latest agreement by states and territories will pause further changes until at least 2028.

The 2025 edition of the NCC is yet to be finalised and will be published in 2026, but only changes related to safety and defects such as water ingress will be allowed as amendments in that version.

The Urban Development Institute of Australia said pausing the code would give the industry an opportunity to focus on improving construction efficiency and driving innovation. “By reducing regulatory uncertainty, this decision will help industry deliver more homes, more affordably, and more quickly,” it said.

Housing Minister Clare O’Neil said the change would make it easier to get homes built. “My state and territory colleagues and I want builders out on site building homes - not in the back office filling in forms,” she said. “That’s what this pause will do.”

Shadow housing minister Andrew Bragg said the government was “building bureaucracy, not houses” and were causing house prices to skyrocket.

“Labor is driving up entry level home prices at near-record levels,” he said. “By opening the government scheme to everyone without any caps, they are supercharging first home prices. Labor has failed to get the houses built, now they’re driving prices up.”

Several economists have warned the 5 per cent deposit scheme will put upward pressure on prices, although views on the extent of that impact remain varied.

Treasury modelling of the policy, for example, suggests it will push up property prices by a modest 0.5 per cent over six years. Property values across the country grew by 0.6 per cent in July alone to be 3.7 per cent higher over the past 12 months.

But modelling in July by Nicholas Gruen’s firm Lateral Economics for the Insurance Council of Australia – which represents mortgage insurers and has campaigned against the scheme – suggests the scheme could increase annual demand by up to 39,000 buyers, driving national property prices up by 6.6 per cent in the first year, and for several years afterwards.

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