It was meant to be a game-changer. A glimmer of hope for young Australians desperate to break into the property market. The expanded First Home Buyer Scheme, which promised to make it easier for first-time buyers to secure a home with a smaller deposit, was supposed to make dreams of homeownership a reality. But is it really working, or has it simply fueled an already overheated market?
The Property Scheme’s Big Changes
The First Home Buyer Scheme was first introduced back in 2020 under the Morrison government, with the aim of assisting new buyers by reducing the deposit requirement from the usual 20% to just 5%. The catch? There was a cap on the value of homes eligible for the program. Sounds great, right? A little less money upfront, and a new home on the horizon.
Fast forward to the present day, and things have shifted. When Labor took office, they expanded the scheme with some pretty big changes—removing the caps on the number of loans guaranteed and, perhaps more controversially, increasing the price thresholds for homes.
A Surge in Demand – And Prices
This change sparked an immediate surge in demand. Suddenly, homes that were once out of reach for many first-time buyers were now eligible for purchase under the scheme. In places like Sydney and Melbourne, where prices have long been an obstacle for first-home buyers, this was seen as a breakthrough. But here’s where things get tricky: with more people able to access the program, prices of homes under the new price caps started to rise.
According to data from Cotality, properties under the price caps saw a 2.3% increase in the final quarter of 2025, reports AFR. Meanwhile, properties above the caps actually dropped in price. In other words, the scheme is doing what it was designed to do: it’s getting people into homes. But it’s also making those homes more expensive.
The Unsolved Problem: Housing Supply
And here’s the kicker: this price rise is happening in an environment where housing supply remains limited. Experts warned that the scheme could push prices up even further, without doing anything to address the underlying issue: a lack of homes for sale. As a result, some first-time buyers, particularly those in areas like outer Melbourne, have found themselves being priced out of traditional first-home buyer areas.
And so, they’re turning to more affordable (but often less desirable) options—places further from city centers or homes that require serious work.
Is a 5% Deposit Enough?
Now, I’m not saying the scheme doesn’t help—it’s undoubtedly opened doors for some buyers who might have otherwise been locked out. But when we look at the bigger picture, it’s hard to ignore the fact that the scheme doesn’t tackle the real problem: there simply aren’t enough homes. This is where things start to feel a bit like a Band-Aid on a wound that needs stitches. Without a comprehensive strategy to build more homes, we risk seeing the same cycle play out over and over.
To be clear, no one wants to see young Australians living in tents or constantly being told they’ll never own property. But the question remains: can a 5% deposit really solve the housing crisis, or is it just another step in the wrong direction?
