The recent expansion of Australia’s First Home Buyer / Home Guarantee (or First Home Guarantee) scheme enabling first-time buyers to enter the market with just a 5 per cent deposit, removing income caps, and raising property price caps is poised to shift dynamics in the property market in several important ways.
What the new scheme changes
From 1 October 2025 onward, the scheme will no longer limit the number of places (guarantees) available to first home buyers. Housing Australia Income thresholds are being removed, and property price caps have been lifted in many regions to reflect escalating home prices (for example, in Sydney from $900,000 to $1,500,000). Crucially, first home buyers under the expanded scheme can avoid paying lenders’ mortgage insurance (LMI) on certain low deposit loans.
These changes substantially lower the barrier to entry, especially for buyers who have struggled for years to save a full 20 per cent deposit.
Who can access the new scheme (from 1 Oct 2025)
- First home buyers (never owned property before).
- People who have not owned a home for at least 10 years – the government treats them as eligible, almost like a “reset”.
- Single parents & single legal guardians with dependents (under the Family Home Guarantee).
- You must be an Australian citizen or permanent resident.
- You must intend to live in the property as your home (not investment).
Increased demand at the lower end
With more first-time buyers eligible and able to borrow with smaller deposits, we can expect more competition for entry-level homes. This “crowding in” effect tends to be most acute in outer suburbs, regional areas, or in markets where housing supply is tight. In markets already facing scarcity, that extra demand can put upward pressure on prices — at least in the short to medium term. In fact, analysts warn that the scheme could “fuel wider price increases.”.
Price inflation risks exceed government forecasts
The government’s own Treasury modelling suggests the expansion would lift prices modestly an increase of about 0.5 per cent over six years. But many economists and industry voices caution this is likely an under-estimate. Some modelled outcomes suggest a much more pronounced price rise, particularly if uptake is high. In markets already experiencing rapid appreciation, that extra stimulus may amplify existing volatility (or even exacerbate bubble risk in some localities).
Wider distortions and affordability challenges
One paradox of demand-boosting policies is that, by pushing prices higher, they can erode the real benefit to first buyers especially lower- and middle-income earners who struggle more with servicing debt. Higher prices can also shift first home buyer activity ever outward (further from city centres) as buyers chase affordability. Moreover, increased competition can spill over to non-first home buyer segments, especially in areas where supply is constrained.
Many analysts emphasise that demand-side measures alone are insufficient the real remedy lies in boosting supply. If new housing stock can keep pace, then price pressures will be mitigated. But in practice, development constraints, planning delays, and infrastructure bottlenecks often slow supply response, meaning demand tends to have its way first.
Over the next few years, we can expect moderate increases in activity across the lower end of the market, more first-time buyers entering, shorter waiting times for deposit accumulation, and more upward pressure on prices in supply tight suburbs. In places already seeing tight inventory, the expansion could meaningfully accelerate price growth. In contrast, in outer or regional markets with more slack, the effects may be more muted.
However, if the scheme is not balanced by effective policies aimed at accelerating housing supply, infrastructure investment, and planning reform, the risk is that affordability deteriorates further — even as more people “get in” nominally. The ultimate impact will likely diverge heavily by region and by how responsive local markets are to adding new homes.