First Home Buyer Scheme Expansion - Greater Access, Rising Risks for Australia's Property Market

Until now, places in the scheme were capped at 35,000 per year, but from October 1 it will be available to all first home buyers. Income caps for eligibility have been removed, and property price caps lifted to reflect today’s markets:

• Sydney/Regional NSW: up to $1.5 million
• Melbourne/Regional Victoria: up to $950,000
• Brisbane/Regional QLD: up to $1 million
• Canberra: up to $1 million
• Adelaide: up to $900,000
• Perth: up to $850,000
• Hobart: up to $700,000

This means, for example, a first home buyer in Brisbane can now purchase a $1 million home with just a $50,000 deposit, saving around $42,000 in LMI and shaving up to a decade off the time it typically takes to save a deposit.

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Who Benefits Most

The scheme primarily benefits:

• First-time buyers struggling with deposit savings: Instead of saving $150,000–$200,000 for a 20% deposit in major cities, buyers need only 5%.
• Renters seeking to break the cycle: A buyer in Bendigo, for instance, could purchase a $600,000 home with a $30,000 deposit, saving six years of saving time and redirecting rent into mortgage repayments.
• Middle-income earners: With the removal of income caps (previously $125,000 for singles and $200,000 for couples), Treasury estimates another 70,000 Australians will become eligible.

For many, this is a generational shift in accessibility: the last time a 5% deposit on a median home equated to a full 20% deposit was 2002.

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Challenges and Risks

While accessibility is improved, challenges remain:

1. Short-term price inflation
   A Lateral Economics report warns the expansion could drive property prices up by 3.5%–6.6% in the first year, adding as much as $90,000 to Sydney property values. This is far higher than the government’s estimate of only a “modest impact.”
2. Supply imbalance
   While demand rises sharply, housing supply remains constrained. To stabilise the system, the government has announced a freeze on further National Construction Code updates until 2029, to avoid additional cost pressures on new builds.
3. Long-term affordability
   The scheme doesn’t directly address systemic housing challenges such as limited supply, land release delays, and tax settings. Without these structural changes, affordability pressures may worsen once the initial surge of new buyers enters the market.

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Lessons from the 2020 Scheme

The current expansion mirrors the First Home Loan Deposit Scheme (FHLDS) introduced in 2020, which offered 10,000 places with a focus on new builds. Its impact provides a guide:

• Access and activity: Lower deposits and waived LMI allowed thousands to enter the market sooner, boosting buyer confidence during uncertain COVID-19 years.
• Price effects: Increased demand contributed to upward price pressure, particularly in high-demand areas. From 2020–2022, national dwelling prices surged by over 20%, with FHB incentives playing a part alongside record-low interest rates.
• Structural limitations: While successful in opening doors, the scheme didn’t address deeper issues such as supply shortages and tax policy, meaning affordability worsened once stimulus-driven demand faded.

The 2020 experience shows that while such schemes empower buyers in the short term, they can inadvertently fuel the very price growth that keeps home ownership out of reach for many.

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Summary

Access

Positive Impacts:

• Lower deposit requirement, no LMI → faster entry to homeownership

Challenges / Risks:

• Risk of over-leveraging, potential mortgage stress

Demand & Market

Positive Impacts:

• Boost to buyer confidence and activity during uncertain times

Challenges / Risks:

• Possible price inflation in short term, especially in high-demand segments

Eligibility Reach

Positive Impacts:

• Broad demographic and geographic inclusion

Challenges / Risks:

• Limited places; caps may exclude buyers or distort choice

Supply Dynamics

Positive Impacts:

• Supports buying activity

Challenges / Risks:

• Demand increases not matched by supply → affordability may worsen

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