The NSW housing affordability crisis has prompted significant government intervention through expanded access to first home buyer schemes and accelerated planning reforms. While these initiatives aim to increase housing supply and improve market accessibility, the resulting development timelines and high-density construction present material risks for all stakeholders. Builders and developers face heightened scrutiny and potential quality control challenges, while property owners may encounter defect-related costs and insurance challenges years after purchase. Understanding these risks and implementing appropriate mitigation strategies is essential for balancing the urgency of housing delivery with long-term building quality and financial sustainability.
First home buyers scheme
Before October 2025, first home buyers relied on NSW stamp duty relief combined with the capped First Home Guarantee scheme, which offered 35,000 places annually with income limits. Eligible buyers could purchase with a 5 per cent deposit and, in limited cases, avoid Lenders Mortgage Insurance (LMI). From 1 October 2025, the scheme was rebranded the Australian Government 5% Deposit1Scheme and fundamentally restructured. It now offers unlimited places, removes all income caps, and raises price caps to $1.5M in Sydney and regional centres and $800,000 elsewhere in NSW2. Buyers can purchase with a 5 per cent deposit while Housing Australia guarantees up to 15 per cent of the loan, removing the need for LMI.
Rezoning around transport
The NSW government has also introduced fast-tracked approval pathways via the Housing Delivery Authority, designating certain projects as ‘state significant developments’ to streamline planning processes. Planning reforms include dual-occupancy policies in R2-zoned land, which is traditionally designated for low-density residential housing, and the Low and Mid-Rise Housing Policy, which commenced on 28 February 2025.
In August 2025, the NSW Government announced plans to rezone the Burwood North Metro Precinct3, which unlocks the potential to deliver around 15,000 homes near the future Sydney Metro West station. Due to its proximity to the Sydney CBD, it exemplifies government plans to concentrate residential development around new public transport infrastructure.
Potential quality issues with accelerated construction
Large scale developments like Burwood North require rigorous oversight. Compressed timelines and pressure to meet housing targets often lead to compromises on the quality controls needed for safe, durable buildings. When developers race to complete projects under accelerated approvals, quality control inevitably suffers. Site supervision is reduced, typical building materials are substituted for cheaper alternatives, and compliance checks are rushed or skipped altogether. Regulators and certifiers, working within the same condensed timeframes, lack capacity to thoroughly review designs or conduct adequate inspections.
The risks of developer insolvency compounds these concerns, as demonstrated by the Dyldam Group collapse in January 2021. Dyldam, once a major player in Sydney’s apartment market, collapsed under the weight of more than $500M in debt4, leaving behind a trail of defective buildings and unpaid creditors in their wake5. Their Hills Shoppingtown site in Baulkham Hills, which was meant to deliver 233 apartments across seven towers, faced significant delays and cost overruns, pushing completion back by over three years. The project was eventually repossessed and sold under receivership, highlighting the financial and reputational fallout that can result from accelerated construction pace.
Such scenarios increase the likelihood of construction defects, structural deficiencies, and fire or safety risks that may persist long after occupancy – exposing builders, certifiers, and property owners to higher claims risks, costly remediation, insurance challenges and potential insolvency. As housing initiatives accelerate, the industry must respond with stronger governance, better supervision, and a commitment to quality that matches the pace of development.
Considerations for property owners
Large-scale developments deliver thousands of apartments in concentrated precincts. Many owners will be first-time buyers who should be aware of insurance obligations which extend beyond their mortgage requirements. Strata buildings may incur defects years after completion, potentially requiring special levies and affecting affordability. A 2023 Strata Defects Survey found that 53 per cent of 642 surveyed buildings had serious defects within six years. Building insurance for strata schemes has also seen material premium increases due to natural perils, construction cost inflation, and claims performance6.
It is also worth mentioning standard strata building insurance policies often exclude claims arising from building defects, design faults, or faulty workmanship. This means that while the policy covers damage from insured events like fire or storm, it typically will not cover the cost of repairing any defects – leaving owners to fund remediation through special levies or protracted legal action against builders and developers. First-time buyers entering these schemes need to understand this gap in coverage and the potential financial exposure it creates for them.
Considerations for builders and developers
Builders and developers face a challenging environment as high-density projects are pushed through more quickly to meet housing targets. While expedited approvals may reduce planning delays, they increase exposure to quality control failures and subsequent claims. Insurers, regulators, and strata owners remain vigilant for defects that emerge from compressed build timelines, labour shortages, and cost pressures. They will also need to be aware of the consequences of cutting corners which may only become evident after completion.
Insurance premiums may rise where risk controls are weak, claims histories deteriorate, or loss exposure is concentrated. Large precincts create clusters of exposure, affecting catastrophe risk and loss accumulation assessments. Projects and properties with robust mitigation strategies, strong claims histories, and compliance with building standards will attract more competitive rates. Developers and builders will want to invest early in better supervision, resilient design, and supply chain certainty will be better placed to secure coverage, maintain reputation, and avoid costly remediation years after handover.
Mega developments face a critical insurance challenge: capacity constraints in the Australian market. Large-scale precincts delivering thousands of units often exceed $300M in insured value, yet only a handful of providers can offer full coverage, and even these are scaling back. Insurers have a finite appetite for concentrated risk exposure, and a single development may exhaust available capacity from individual underwriters7. Despite the resilience of many high-rise buildings to natural perils, insurers remain cautious due to potential large-scale losses, defect risks, and co-insurance complexity.
This capacity shortage is systemic across Sydney and Melbourne. Developers and strata committees must piece together coverage from multiple insurers or access facultative reinsurance markets, adding complexity, cost, and which may have potential gaps in cover. As demand for high-density living surges, limited capacity threatens to delay coverage, inflate premiums, and complicate risk management. Developers planning large precincts should engage insurance advisors early to assess market capacity and structure projects to improve insurability at completion.
Conclusion
While initiatives to accelerate housing development are crucial to addressing NSW’s housing affordability crisis, speed cannot come at the expense of quality. The key is embedding risk and insurance strategy into the planning phase, not treating coverage as an afterthought when policies are required for settlement or strata registration.
Developers who integrate insurance considerations early can identify and address risk factors before they become costly problems. This means strengthening quality controls, improving contractor selection, and implementing defect prevention measures that both reduce claims exposure and secure competitive premiums. Waiting until insurance becomes a regulatory requirement inevitably leads to unexpected hurdles, limited coverage options, and higher costs.
Property buyers who understand insurance gaps and potential defect liabilities before purchase can make informed decisions and budget for contingencies. A proactive risk strategy built into project conception and property acquisition protects all stakeholders and ensures housing acceleration does not create a legacy of defects, disputes, and financial distress.
1 Expanded Australian Government 5% Deposit Scheme to support more Australians into home ownership
2 Unlimited places, higher property price caps for first home buyers from 1 October 2025
3 Ministerial media release: Housing Delivery Authority fast tracks 18 projects as State Significant Developments
4 Dyldam Group owed $500m
5 Property developer Dyldam’s decade of debt, defective buildings and corporate reincarnation
6 Research on serious building defects in NSW strata communities
7 High-end strata ‘faces capacity challenge’
