The Federal government expanded home guarantee for its citizens with the introduction of the Australian Government 5% Deposit Scheme on 1 October 2025. This comprehensive reform removes previous barriers, allowing all first-time home buyers to purchase a home with just a 5% deposit.
The expanded scheme eliminates income caps entirely and offers unlimited places for purchase. The previous scheme restricted eligibility to applicants with taxable incomes up to $125,000 annually, or $200,000 for joint applications, with a limit on the number of applicants accepted. Under the new arrangement, all first-time buyers can access the scheme regardless of their income level, provided they meet other eligibility criteria. Participants can also purchase homes without Lenders Mortgage Insurance, benefitting from increased property price caps that better reflect the current market conditions.
To qualify for the scheme, buyers need to meet the following criteria:
Eligible buyers must be genuine first home buyers or must not have owned property in Australia for at least a decade
Investment properties can be specifically excluded to ensure the scheme benefits owner-occupiers
Participants can purchase various property types, including existing houses, townhouses, apartments, house and land packages, off-the-plan units, or vacant land
Purchasers can secure owner-occupier home loans with a maximum 30-year term through one of 30 participating lenders
The scheme forms part of three federal initiatives supporting home ownership, alongside the First Home Super Saver Scheme and the incoming Help to Buy Scheme. Together, these programmes represent the government's comprehensive strategy to address housing affordability challenges affecting many Australians.
Figure 1: Price caps and median sales price in greater capital city areas
Source: JLL Valorem, Australian Government 3Q25
Figure 1 shows median house prices approaching price caps across major cities, with Sydney, Brisbane, Adelaide and Perth reaching record-high sale prices. Sydney’s median house price currently stands at $1,475,000 (as of October 2025), just $25,000 below its price cap. Melbourne, however, offers the most accessible housing market with median prices approximately 11% below the cap. Apartments appear much more accessible, with median prices sitting well below the price caps across all cities. Sydney offers the most accessible apartment market, with median apartment prices $695,000 below the price cap.
Although the scheme aims to help first-home buyers, it could potentially drive up property prices through increased competition. The removal of income caps and unlimited places could intensify the competition at the lower end of the market, potentially increasing prices in the very area the scheme targets. Given Australia's ongoing supply constraints and limited properties available at or below the price caps, increased demand may paradoxically price out middle and lower-income households as competition inflates values. This market dynamic can create significant development opportunities, as developers capitalise on increased demand for properties within the price caps. This allows them to target the first home buyer segment with appropriate housing products.
While the expanded scheme undoubtedly makes home ownership more accessible, its long-term effectiveness will depend on broader housing supply responses and market dynamics. The government's commitment to supporting home ownership is clear, but managing the balance between accessibility and market stability remains an ongoing challenge. This will require careful monitoring and potential adjustments as the scheme's impact becomes apparent in the coming months.