More than 102,000 first-home buyers have used Australia’s expanded low-deposit scheme in its first year. On 1 October, the government reported 102,594 participants since the expansion, including 33,413 in Victoria, 28,158 in New South Wales and 20,125 in Queensland.
The expansion began on 1 October 2025, removing income caps and the limit on scheme places while increasing property price caps. Eligible buyers can purchase with a deposit as low as 5% without paying lenders mortgage insurance.
For developers and agents, the participation figure raises a practical question: are enough homes available where eligible buyers want to live, at prices they can afford to repay?
Buyers who can manage the repayments may be able to purchase before accumulating a conventional deposit. The insurance saving also reduces upfront costs. But neither resolves a shortage of suitable homes, and buyers borrowing a larger share of the price face higher repayments.
A smaller deposit means a larger mortgage
The Australian Government 5% Deposit Scheme supports qualifying purchases of existing and new homes, including apartments, townhouses and eligible construction arrangements. It is intended for owner-occupiers. Eligibility also extends to some previous owners who have not owned property in Australia for ten years.
Property price caps restrict which homes qualify. Both the purchase price and lender-assessed value must be at or below the applicable limit. For vacant land purchased with a separate building contract, the combined land and construction cost must also meet the cap.
The limits vary considerably. New South Wales has a A$1.5 million cap for the capital city and specified regional centres, compared with A$800,000 elsewhere. Victoria’s corresponding limits are A$950,000 and A$650,000. A development aimed at scheme buyers therefore needs pricing suited to its postcode.
Consider an A$800,000 home with an equal lender valuation. A 5% deposit is A$40,000, compared with A$160,000 at 20%, before transaction costs. The corresponding loans would be A$760,000 and A$640,000. At an assumed constant interest rate of 6% over 30 years, principal-and-interest repayments would be A$4,557 and A$3,837 a month.
The buyer needs A$120,000 less for the deposit but pays A$719 more each month, using the unrounded calculations. The comparison assumes identical interest rates and excludes fees and other ownership costs.
Avoiding lenders mortgage insurance is a separate benefit. A buyer borrowing 95% outside the scheme might otherwise have to pay the premium, adding to upfront expenditure or the loan balance.
Housing Australia’s guarantee protects the participating lender against an eligible shortfall after default and sale, up to an agreed limit. It does not provide cash to the buyer or cover ordinary mortgage repayments. Lenders still apply their credit requirements.
An agency advertising around the 5% deposit may consequently attract substantial interest without finding enough purchasers able to borrow the balance.
Homes under construction still take time to reach buyers
The National Housing Supply and Affordability Council’s August report recorded 244,000 dwellings under construction in the March quarter of 2026, the highest total since records began in 1984. About 308,000 homes had been completed across the first seven quarters of the National Housing Accord period.
The Accord target is 1.2 million new homes over five years from July 2024. The council forecast reaching the total in the December quarter of 2030, one quarter later than its April forecast and beyond the original June 2029 deadline.
House construction costs were 51% above pre-pandemic levels. The council also warned that higher costs, softer sentiment and recent interest-rate increases could defer some construction. Its state forecasts varied markedly: Victoria was expected to reach its share of the target in December 2029, New South Wales in March 2032 and Queensland in March 2031.
The Australian Bureau of Statistics’ August figures showed total dwelling approvals falling 6.1% from July to 16,953, in seasonally adjusted terms, while remaining 10.3% above August 2025. Private-sector house approvals rose 3.7% over the month; private-sector dwellings excluding houses fell 21.2%.
A large construction pipeline offers the prospect of more choice, but buyers searching now depend on completed homes and projects with credible delivery dates. Higher building costs can also make it harder to deliver within scheme price caps.
The national figures do not isolate construction prompted by the deposit scheme. Participants may buy existing properties or bring forward purchases they already planned. Strong scheme participation offers developers little assurance of sales if their homes exceed local buyers’ borrowing budgets.
Apartment prices are only part of affordability
Reducing floor area may bring a home within the price cap, but a smaller apartment still has to suit its buyer. First-home purchasers have different space requirements, working arrangements and family plans. A low deposit cannot compensate for an unsuitable layout or location.
Household budgets, commuting needs and competing properties shape demand in each area. Shared facilities, lifts, parking and building services affect both selling prices and the bills residents face after moving in. A lower purchase price can lose its appeal if ongoing charges stretch the household budget.
For apartment buyers, owners’ corporation fees add to monthly expenditure. An expected levy for major repairs can also alter the affordability of an otherwise attractive purchase. Clear information about fees and likely expenditure helps buyers compare homes beyond the deposit and advertised price.
New-build purchases introduce additional deadlines. Housing Australia’s guide requires construction to start within 12 months and finish within 36 months of loan settlement for the relevant building arrangements. Buyers must move in within six months of the occupancy certificate being issued.
Off-the-plan purchases have separate conditions, including settlement within 90 days of the date the buyer signs the home loan agreement and occupation within six months of settlement.
For developers, construction schedules and lender requirements can therefore affect sales as much as the headline price. A purchaser interested at launch may still face financing difficulties closer to completion.
Completed purchases will tell developers more than enquiries
Interest generated by a 5% deposit headline is only the beginning of a sale. The more useful measure of demand is how many purchasers obtain finance and complete their purchases.
Reasons for failed applications or withdrawn purchases can reveal where an offer falls short. Some buyers may lack repayment capacity; others may face a valuation below the agreed price or find ongoing costs too high. Enquiry numbers alone conceal the differences.
The government’s anniversary release reported that 99% of scheme borrowers were ahead of or on track with repayments. It did not provide a breakdown of the 102,594 participants by purchases of existing and newly built homes.
Knowing where scheme participants bought newly built homes, what they paid and which dwelling types they chose would help developers plan future projects more effectively than the national participation total alone.
Local lender feedback and completed sales can inform dwelling sizes, prices and payment schedules in the meantime. A project attracting many enquiries but few financed purchases may need a different offer, rather than more marketing.
Lower deposits and avoided mortgage insurance can help buyers purchase sooner. Whether the scheme supports more construction depends on developers delivering suitable homes within local price caps, with repayments and ownership costs buyers can sustain.
Sources
- Australian Treasury: scheme anniversary results, 1 October 2026
- Housing Australia: 5% Deposit Scheme FAQs
- Housing Australia: property price caps and valuation conditions
- Housing Australia: 5% Deposit Scheme information guide, dated 1 July 2026
- National Housing Supply and Affordability Council: August 2026 quarterly report
- Australian Bureau of Statistics: Building Approvals, Australia, August 2026
