How the 5% Deposit Scheme is Influencing the Property Market？

The Australian Government’s 5% deposit scheme, also known as the First Home Guarantee, has significantly changed the dynamics of entry-level property demand.

By allowing eligible first-home buyers to enter the market with as little as a 5% deposit and without paying lenders mortgage insurance (LMI), the program has lowered one of the biggest barriers to home ownership: the upfront capital requirement.

While designed to support young buyers and key workers, the broader impact on the property market has been substantial.

Firstly, buyer demand has intensified at the lower and mid-price segments, particularly for apartments and entry-level houses in well-connected urban corridors. Increased purchasing power in this segment has contributed to stronger competition, with multiple buyers competing for the same properties — often leading to upward pressure on prices.

Secondly, the scheme has unintentionally strengthened developer confidence in small to medium-scale projects, as improved buyer access increases the likelihood of off-the-plan sales and project absorption. This has been particularly evident in growth areas around major cities, where transport and infrastructure investment continues to expand.

However, the program also creates longer-term questions around housing supply. Without sufficient new construction, increased demand may continue to outpace availability, reinforcing affordability challenges rather than resolving them.

For investors and developers, the 5% deposit scheme is a double-edged sword: while it creates stronger short-term demand, it also highlights the importance of disciplined planning, feasibility assessment and strategic timing in project execution.

In this environment, a data-driven approach — rather than speculative decision-making — becomes essential in identifying sustainable opportunities.