UPDATE: Home values are soaring for properties under the Australian Government’s 5% Deposit Scheme, a trend that has gained momentum since the scheme expanded on October 1, 2023. First-time home buyers are flooding the market, leading to a notable increase in demand for affordable homes.
According to Cotality, properties priced within the scheme’s limits rose by 1.2% in October, while those above the cap saw a modest 1% increase. This surge highlights a significant shift in the housing market, where budget-conscious buyers are competing fiercely for lower-priced homes due to ongoing high interest rates.
The 5% Deposit Scheme allows first-time buyers to enter the market with a minimal deposit, avoiding costly lenders’ mortgage insurance. As of this expansion, there are no limits on the number of buyers eligible or their income levels. Eligible property price caps have increased to $1.5 million in Sydney, $950,000 in Melbourne, $1 million in Brisbane, and $850,000 in Perth.
The impact of these changes is profound. Nationally, homes in the lower quartile—representing the cheapest 25% of the market—saw a 4.2% increase in value over the last three months, starkly outperforming the 2.2% rise for higher-end properties. This trend is particularly strong in cities like Sydney (3.4% vs. 1.7%), Melbourne (2.5% vs. 0.5%), Brisbane (5.2% vs. 4.5%), Adelaide (4.1% vs. 2.6%), and Perth (6.6% vs. 4.5%).
Experts attribute the rising prices of affordable properties to limited borrowing capacities due to elevated interest rates, which restricts buyers’ options. This shift means that more buyers with smaller budgets are now vying for lower-priced homes, creating a competitive atmosphere in the market.
This development matters NOW, as many potential buyers are grappling with the realities of rising costs and interest rates. The expansion of the 5% Deposit Scheme could be a lifeline for first-time buyers, allowing them to secure homes in a challenging market.
What’s next? Analysts suggest that this trend is likely to continue, with more buyers entering the market as they seek to take advantage of the scheme. The ongoing competition for affordable housing may further drive prices up, making it crucial for prospective buyers to act swiftly in this evolving landscape.
Stay tuned for more updates as the situation develops.
