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New data from property analytics company Cotality has revealed that first home buyers are increasingly focusing on dwellings eligible under the government's 5 per cent Deposit Scheme, pushing up house prices in these more affordable price brackets.
According to Cotality, since the scheme was expanded in October 2025 to remove income caps and placement caps, the growth in home prices has diverged depending on whether properties fall under or above the scheme’s price caps.
Launched by the Labor government in its expanded form on 1 October, the 5 per cent Deposit Scheme allows first home buyers to purchase a home with a 5 per cent deposit, with the government guaranteeing the remaining portion of the loan and enabling buyers to avoid paying lenders mortgage insurance (LMI).
The recent expansion removed caps on places and income limits and updated property price caps to better reflect rising median home prices. More than 21,000 first home buyers have used the scheme since it was launched on 1 October, according to data in the Treasury’s Mid-Year Economic and Fiscal Outlook (MYEFO) published on 17 December.
Eligible properties are capped at $1.5 million in Sydney, $1 million in Brisbane and Canberra, and $950,000 in Melbourne. Lower caps apply in other capitals, with limits set at $900,000 in Adelaide, $850,000 in Perth, and $700,000 in Hobart.
Cotality found that, in the December quarter 2025, homes that fell within the Deposit Scheme caps grew by 3.6 per cent, compared with 2.4 per cent growth for homes above the caps.
During the December quarter, 89 per cent of suburban areas recorded faster growth in properties priced within the caps compared with higher-priced homes.
Momentum in the lower-priced segment was already building ahead of the scheme’s expansion.
Prior to the guarantee scheme expansion, house price growth was running at around 0.9 per cent, month on month. By October, price growth for properties below the cap was at 1.4 per cent month on month, compared to 1.1 per cent above the cap. By December, the gap had widened further, with below-cap growth running at 1 per cent and above-cap growth running at 0.5 per cent, the researchers found.
Cotality noted that several factors may be contributing to the stronger performance at lower price points, including demand being brought forward ahead of the scheme’s expansion, serviceability constraints amid higher interest rates, and increased investor activity in the lower-priced segment.
Regional differences
Regionally, the trend of stronger growth in homes priced below the scheme’s caps is evident across nearly all markets. This pattern is consistent across every capital city and regional area, with the exception of the ACT.
Sydney recorded the largest difference in performance, with homes valued under the cap rising 2.3 per cent over the December quarter, while homes above the cap declined by 0.1 per cent.
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ACT: Dwelling values rose 2.6 per cent for homes above the price caps and 1.9 per cent for homes below the caps.
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Adelaide: Values increased 4.8 per cent above the caps and 5.6 per cent below the caps.
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Brisbane: Homes above the caps rose 5.0 per cent, while below-cap homes increased 6.5 per cent.
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Darwin: Values grew 5.1 per cent above the caps and 6.1 per cent below the caps.
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Hobart: Above-cap values rose 2.9 per cent, compared with 4.6 per cent growth for below-cap homes.
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Melbourne: Homes above the caps increased 0.3 per cent, while below-cap properties rose 1.4 per cent.
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Perth: Values climbed 7.3 per cent above the caps and 8.4 per cent below the caps.
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Sydney: Above-cap values fell 0.1 per cent, while below-cap homes rose 2.3 per cent.
Cotality research director Tim Lawless said the expanded scheme had sharpened demand for lower-priced homes in almost nine‑in‑10 regions.
He said: “We’re seeing a clear shift in momentum, with buyers increasingly targeting homes that fall under the new price caps – especially in Sydney, where the value gap is most pronounced.
“This trend was already visible before the scheme’s official start on 1 October, suggesting some buyers acted early to secure properties before competition increased.”
What brokers are seeing
Speaking to Broker Daily, Melanie Smith, an Aussie broker based in Windsor in Brisbane, said that the Cotality findings align with what she’s seeing on the ground.
“First home buyers are getting really good opportunities to get in[to market] now that the schemes have evolved to include more eligible buyers and properties,” she said.
“These buyers would have been saving for longer, or just not getting into the market at all, without these schemes. But the flow-on effect is that they are pushing the prices up to meet the demand. And competition is hot.”
Luke Camilleri, director and senior broker for Mortgage Choice Paramatta, said that people are "continually missing out" due to the increased competition.
He said: "Without a doubt, the $700k and $750k properties are pushing into $800k and $800k pushing into $900k.
"You've got people who are trying to be sensible and not pay over for a particular property and you've got people on the other side of the coin that are basically doing whatever they can to get in, and that's driving up the value of property.
"We're seeing people continually getting beaten or we're seeing people that are paying lets say $1.4 million to secure a property that our data says is worth $1.3 million."
Camilleri also noted that the three-month early launch of the expanded scheme caused blowouts in the turnaround times for many loans.
"A lot of people had their hands on the submit button, so when it launched early, there was a huge rush of applications just ready to go."
Michaela Shaw, finance specialist at MoneyQuest Penrith and Blue Mountains, said while the expanded scheme had been driving increasing demand, house prices had only increased marginally in her area.
“It’s not necessarily driving up prices too heavily [here]. They’ve risen but not extremely. However, I think the scheme has encouraged consumer sentiment, because more people are entering the market."
As competition for properties intensifies, brokers are now placing greater emphasis on realistic budgeting, speed of approval, and buyer preparedness.
Smith said that she’s adapting by setting realistic expectations with clients, working with lenders that can approve quickly, and keeping buyers informed about market conditions.
She said: “I’m giving real examples to customers, discussing how hot the market is and asking them to revisit the budget to make sure they can really afford what they want to do.
“I’m suggesting they be pre-approved for more than what they may want, just to have that buffer for negotiations. However, even with the 3 per cent buffer in our assessment, I’d like them to stress-test their repayments against two rate increases, just to make sure this is really the right fit," she said.
“The funny thing is, people do keep finding ways to afford what they want. For those who cannot, I leave them with a plan and information so they can set clear goals. But right now those goalposts keep changing.”
For Shaw, success lies in good information and starting conversations earlier.
“We try to take an education-first approach. There are a lot more people trying to get themselves in a position where they’re ready when they’re not [quite there],” Shaw said.
“Coming in as early as we can has been the biggest thing that we’ve done to keep on top of things.”
[Related: WA brokers warn of limitations of Help to Buy scheme]