Albanese’s 5% deposit scheme sets affordable property markets alight

When my mother sent me property listings in the suburbs she and my dad were considering for their retirement this week, I nearly fell off my chair.

“Vishal, what is happening to Western Sydney?” she asked, bewildered, as she noticed houses once priced at around $750,000 suddenly listed closer to $900,000 overnight.

At first I assumed it was a data glitch. But the timing was no coincidence - today marked the launch of the Albanese Government’s expanded First Home Guarantee/5% Deposit Scheme.

Much like a stock market rally that surges ahead of a bullish announcement, the property market seemed to move before the ink was dry. Anecdotal reports across online forums spoke of six-figure overnight jumps, from Western Sydney right through to Dubbo.

Adding to the sense of urgency, new figures from property consultancy Cotality show home values jumped 0.8% in September, the strongest monthly gain in nearly two years. Darwin led with a 1.7% rise, followed by Perth at 1.6% and Brisbane at 1.2%, while Sydney rose 0.8%.

Cotality noted that the strongest pace of growth has rippled from the lower quartile of the market into the middle, a reflection of increased borrowing capacity and heightened demand.

"With nearly half of suburbs sitting under new price caps, the expanded Home Deposit Guarantee is unlocking opportunity- but also intensifying buyer competition amid already tight supply," Cotality noted.

What changed?

The government’s decision to bring forward and expand the scheme by three months has fundamentally reset the entry-level property market.

• Income caps abolished – previously, only those earning under certain thresholds could qualify.
• Price caps lifted – thresholds rose to $1.5 million in Sydney (from $900,000), $950,000 in Melbourne (from $800,000), and $1 million in Brisbane (from $700,000).
• Lower deposit hurdle – first home buyers can now purchase with just a 5% deposit and avoid lenders mortgage insurance, saving tens of thousands in upfront costs.

Treasury expects the program to issue an additional 20,000 guarantees in its first year. Official modelling suggests this will add about 0.5% to house prices over six years, but the early signs point to a far sharper impact at the affordable end, with users on Redditt noting sudden, sharp price surges across markets (see below).

Demand unlocked, supply missing

Property specialist and former financial adviser Kiril Ruvinsky correctly predicted the scheme would ignite demand in the sub-$1.5 million market.

Enquiry volumes from first-home buyers are now at record highs for his business, Strategic Investor Group.

“Yes, we expected it to play out exactly as it is doing. Tonight we are presenting to 45 first home buyers, all wanting to get a small piece of this great brown land,” says Ruvinsky.

 But as he warns:

“The Guarantee is removing the deposit hurdle but not solving the supply hurdle. Demand is rising faster than new stock is being delivered. This is creating fierce competition in affordable suburbs, where first home buyers are now forced to compete directly with investors.”

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The economist’s view

Nerida Conisbee, Chief Economist at Ray White, says the data backs up what buyers and brokers are seeing.

“Australia’s most affordable housing is experiencing significantly stronger price growth than typical properties, with government incentives and affordability constraints driving intense competition for entry-level homes,” she says.

Her research shows affordable housing is outperforming nationwide:

• Affordable houses (bottom 25% of the market) are growing at 8.3% annually, versus 8.0% for the broader market.
• In Sydney, affordable homes are up 7.2% annually compared to 6.3% for the average house.
• In regional Queensland, affordable homes are surging 13.8%, compared to 11.6%.
• Perth’s cheapest apartments are up 16.5%, outpacing the wider unit market at 14.5%.

“The combination of government incentives, constrained supply, and demographic pressures from millennials entering peak home-buying years is creating a structural shift in how different price segments perform,” notes Conisbee.

Winners, losers, and what comes next

The Albanese Government’s expanded 5% deposit scheme may prove to be a double-edged sword. It has opened the door for thousands of Australians to buy their first home, but at the same time, risks fuelling the very affordability crisis it sought to solve. 

With migration strong, rates falling, and supply still constrained, keeping the dream of home ownership alive will be harder than ever.