Labor's five per cent deposit scheme took effect on Wednesday, allowing eligible first-home buyers to get a mortgage with a much smaller deposit and avoid paying for lenders' mortgage insurance.
Some analysts argue the measure will add demand to an already-hot property market.
The Insurance Council has previously claimed it could push up the cost of a home by as much as 10 per cent in the first year alone.
Treasury modelling suggests the impact will be much smaller at just 0.5 per cent over six years.Â
The prime minister argues the scheme, which was a campaign promise, will level the playing field between first-home buyers and investors.
"What that will do is allow more young people in particular to get into their first home," he told reporters in Sydney on Wednesday.
"We want more Australians to realise the dream of home ownership."
Analysis by online property marketplace Domain found the initiative would slash the time to save for a deposit in Sydney, for example, from 11 years to two or three years.
Homebuyers in Melbourne and Brisbane will save five years and nine months, while Adelaide purchasers will have the deposit hurdle lowered by five years and seven months.
"This is life changing stuff and a genuine expansion of home ownership opportunities for that generation of Australians who are facing such a different housing market than their parents and grandparents faced," said Housing Minister Clare O'Neil.
The sooner a first home buyer can purchase a property, the sooner they can begin to build equity in their own home, rather than paying off a landlord's mortgage, potentially saving hundreds of thousands of dollars in rent.
But a lower up-front deposit meant more debt overall and a higher risk of slipping into negative equity if prices fell, noted Domain chief economist Nicola Powell.
The government believes tens of thousands of home buyers will take advantage of the scheme in its first year.
Peter Tulip, chief economist at the Centre for Independent Studies, is concerned about first-home buyers racking up too much debt.
"It does address a real problem, but it does so in a fairly risky, dangerous way," he told ABC TV.
"It's going to encourage people to take one-way bets on the housing market."
Nationals senator Bridget McKenzie said the government was making the housing affordability crisis worse.
"They are increasing demand for housing supply by continuing their program of high immigration numbers," she told Seven's Sunrise.
"It's only going to drive the prices of houses up, not down, and we are seeing 36 being the age for when Australians get into their first home.Labor insists its home deposit scheme should be seen as one of a number of housing policies, which also include billions of dollars in funding to increase supply.
But Reserve Bank governor Michele Bullock suggested the measures will take more than two years before they start to take effect.
The median Australian property value climbed to $857,280 in September, a jump of 0.8 per cent, property analytics firm Cotality reported in its monthly home value index on Wednesday.
13°C