The Australian Government’s expanded 5% deposit scheme was launched with one clear goal: make it easier for first-home buyers to enter the property market sooner. By requiring just a 5% initial deposit (with the government guaranteeing part of the loan), it removes the biggest barrier that has kept many prospective buyers stuck renting for years. Treasury Ministers
But recent market data reveals something more complex — the impact of this policy isn’t uniform. Instead, it highlights significant regional differences and underscores a broader issue in housing affordability: supply vs. demand.
🔍 1. What the 5% Deposit Scheme Does
Under the expanded program, first-home buyers can:
- Buy a property with only 5% down and no Lenders Mortgage Insurance.
- Access higher property price caps aligned with current market prices.
- Apply regardless of income or region — including regional buyers with no caps on places. Treasury Ministers+1
This removes traditional entry barriers — but because supply hasn’t kept pace with demand, it has also changed market behaviour.
📊 2. Big City Winners — More Eligible Properties, More Competition
In larger markets like Melbourne and Sydney, buyers using the scheme still have a relatively wide selection of eligible homes:
- In Melbourne, over 60% of house sales and nearly 86% of unit sales fall under the price cap, giving buyers plenty of choices.
- Sydney, with a higher cap, also sees a large portion of homes (especially apartments) eligible. Elite Agent
Even so, these markets aren’t less competitive — just better supplied — and prices are rising fastest at the lower end where the scheme applies. Recent data shows that properties under the price caps in many cities are growing faster than higher-priced homes — hinting that the scheme, combined with other market forces, is influencing demand patterns. ABC
🏖️ 3. Struggles in Smaller and Regional Markets
Contrast that with markets like the Gold Coast:
- Only about 27% of detached homes fall under the relevant price cap.
- Even though units are more affordable, the absolute number of options remains small compared with big cities. Australian Broker News
This gap highlights how regional factors — like slower housing development, planning bottlenecks, and rising construction costs — are reducing the stock available at “entry level” prices.
In many regional areas, the pool of affordable homes is smaller than first-home buyers hope — meaning competition is just as fierce, even if headline prices appear lower.
📈 4. A Side Effect: Rising Prices at the Lower End
One consequence of the scheme’s demand boost is that properties below the price caps are experiencing stronger growth than higher-priced homes. Markets like the Melbourne inner east, Perth inner areas, and Sydney’s Northern Beaches have seen below-cap homes grow faster in recent months. Elite Agent
This suggests that rather than reducing prices, the scheme is helping move demand into the affordable segment, which can inadvertently push those prices up — especially when supply is tight.
💼 5. What This Means for First-Home Buyers
Here’s the practical takeaway:
✔ Good news:
- The 5% deposit scheme has genuinely helped many buyers get into the market sooner and avoid years of saving.
- Regional access improvements mean more buyers can participate. Treasury Ministers
⚠ But be cautious:
- More demand without more supply doesn’t solve affordability — it can make it worse in some areas.
- Even with a 5% deposit, buyers still need to afford monthly repayments and other costs.
- Some regions simply don’t have enough eligible homes to make the scheme effective on its own. Elite Agent
Ultimately, the policy reduces one barrier — but doesn’t change the fundamental challenge that many first-home buyers face in Australia: too few affordable homes in the places people want to live.
🏘️ Conclusion — A Policy That Helps, But Isn’t a Panacea
Australia’s 5% deposit scheme is making a real difference for many people — but its effects vary widely depending on location. In larger cities with healthy affordable stock, buyers have choices and competition is predictable. In smaller regions or markets with limited eligible properties, buyers still struggle despite the support.
For true long-term affordability, most experts agree that increasing housing supply — especially entry-level homes — is essential. Demand-side policies can open doors, but without more houses to go around, the competition only gets tougher.
