2026 Federal Budget Must Prioritise Housing Supply Over Demand Incentives — What Borrowers Need to Know

With the 2026 Federal Budget approaching, housing industry experts and mortgage industry commentators are calling on the government to focus on increasing housing supply rather than introducing new demand-side incentives — warning that grants and subsidies without new supply will simply push prices higher.

The Core Argument

Reporting by Australian Broker (April 2026) highlights growing industry consensus: Australia's housing crisis requires a supply-side solution, not more sweeteners. First home buyer grants, low-deposit schemes, and stamp duty concessions may help individual buyers in the short term, but without new homes being built, these measures simply add purchasing power to a constrained market and inflate prices further.

Data from the Australian Bureau of Statistics (ABS) shows Australia's population reached 27.7 million as of September 2025, with demand for housing continuing to outpace new construction approvals — particularly in Melbourne, Sydney, and South East Queensland.

The Problem with Demand Incentives

Demand-side interventions have dominated Australian housing policy for over two decades. The evidence is mixed at best:

• The First Home Owner Grant (FHOG), introduced in 2000, has repeatedly been shown to capitalise into house prices rather than improve affordability
• The First Home Guarantee (FHG) scheme has increased high-LVR lending, with APRA recently flagging concerns about systemic risk from the growing volume of loans with deposits under 5%
• Stamp duty concessions increase competition at entry-level price points, pushing prices up for the very buyers they aim to help

What Industry Wants from the 2026 Budget

Mortgage industry voices and housing economists are calling for:

1. Accelerated planning reform: Cutting the time from DA approval to construction commencement
2. Build-to-rent incentives: Tax treatment changes to encourage institutional investment in rental supply
3. Infrastructure funding: Commonwealth co-investment in water, sewerage, and roads to unlock greenfield sites
4. Higher density near transport: Federal pressure on state governments to increase density near transport corridors

What This Means for Borrowers

In the absence of meaningful supply increases, property prices in Australia's major cities are likely to remain elevated. Borrowers — particularly first home buyers and those seeking to upgrade — should:

• Explore all lending options, including non-bank lenders who may approve applications the major banks decline
• Consider emerging suburbs and regional centres where supply constraints are less acute
• Seek pre-approval early to understand their borrowing capacity before market conditions change

At MPFG Capital, we help borrowers navigate the lending market regardless of broader economic conditions. Our expertise in Alt Doc, commercial, and bridging finance means we can find solutions for borrowers at all stages of the property journey.

This article is general information only and does not constitute financial or investment advice. Please consult a qualified professional before making property or lending decisions.