Summary
A major policy change comes into effect on October 1st: first home buyers will now be able to purchase properties up to $1.5 million with just a 5% deposit. While aimed at helping young Australians enter the market, the impact will likely add heat to an already competitive buyer segment.
What’s Changing from October 1st?
The Albanese Government is introducing a 5% deposit scheme for first home buyers on purchases up to $1.5 million. Buyers will be able to borrow 95% of the purchase price, without needing to pay Lenders Mortgage Insurance (LMI).
Previously, this type of scheme applied to homes under $1 million. This change significantly increases the maximum spend for eligible buyers—and will likely drive up buyer demand in the $1M–$1.5M price range.
How Will This Affect the Market?
When borrowing capacity increases, so do buyer expectations. What was once a $1M cap for many first home buyers will now stretch to $1.1M or even $1.15M, as buyers look to maximise their new ceiling.
This added demand could push prices up by 15–20% in entry-level markets, particularly in well-connected metro and fringe suburbs. While we’re not expecting a return to COVID-era price surges, the increase in purchasing power is likely to drive renewed competition in what’s already one of the hottest segments.
What’s the Catch?
The policy may open the door for higher spending, but not every buyer can walk through it.
A $1.5 million property with 5% down still means borrowing $1.425 million. At today’s interest rates, repayments could exceed $8,000 per month. Most first home buyers simply don’t earn enough to service a loan of that size—especially without dual incomes and minimal other debts.
And let’s not forget stamp duty. With increased prices comes a higher tax bill, which remains one of the government’s largest revenue streams. So while the scheme aims to help buyers, it also feeds back into government income.
Our Take at Grantham Buyers Agents
Policies like this are framed as affordability solutions—but in practice, they often fuel short-term price growth. If you’re a first home buyer, this makes it even more important to have a clear plan and move strategically.
We expect to see increased urgency and competition in the $1M–$1.5M bracket over the coming months. If you’re looking to buy before prices shift further, we can help you move with confidence.
