The Albanese Government’s revamped first-home buyer scheme, introduced late last year, may be working against those chasing an affordable home, new data has revealed.
The government in October raised price and income caps on its First Home Guarantee Scheme, expanding the number of people who could purchase with 5 per cent deposits without needing to pay pricey lender’s mortgage insurance.
Analysis of price growth figures has shown that since September last year, those lower-priced homes which fall within the scheme’s price caps have generally recorded stronger growth than those above it.
Competition for these affordable homes is going to continue to intensify as new listings decline nationwide, according to the Real Estate Buyers Agent Association of Australia (REBAA).
The Albanese Government’s five per cent deposit scheme has seen the price of homes within the $1.5m price cap grow. Picture: Jason Edwards/NewsWire
KPMG chief economist Brendan Rynne said the housing market showed “unexpected strength” during the second half of 2025, which was spurred by the Labor government’s policy and lingering inflation, which pushed house prices far higher than anticipated.
“While the five per cent deposit scheme offers the higher price cap for Sydney of $1.5m, broadening eligibility, in practice most first-home buyers are still constrained by borrowing capacity and cannot afford the mortgage required, even at the lower end of the city’s market,” he said.
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Since the start of the decade, national housing affordability has declined, while the value of home loan repayments as a proportion of income has risen. Picture: KPMG
According to REBAA, Australia’s housing market is set to face one of its “most significant supply shortages in years”.
Currently, total national residential listings are now about 10 per cent lower than a year ago, according to SQM Research.
New research from KPMG’s latest Residential Property Outlook has predicted house prices in Sydney to grow at a moderate 5.8 per cent this year, as the city’s position as a major jobs hub continues to attract buyers and offset affordability challenges.
Mr Rynne said Sydney’s outlook for 2026 was one of “balanced growth” which would be limited by persistent supply and affordability issues.
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The value of new home loan commitments has approached almost $1tn nationally. Picture: KPMG’s Residential Property Market Outlook
REBAA president Melinda Jennison said buyers are now competing in markets where quality stock is scarce and sells quickly.
“We’re not just dealing with seasonal fluctuations because there is a structural shortage of listings and buyers are feeling the pressure nationwide,” she said.
“Despite the fact there aren’t enough houses being built, buyers in these cities are prepared to pay more than the supply shortage would justify.
“As a result, at the entry level, the market will continue outperforming this year, with more young people seizing the opportunity to break the rent cycle and lock in their first home sooner, intensify competition at the affordable end and ensuring prices remain firm.”
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The queue for a recent home open in Enmore, Sydney. Pictures: TikTok @innerwestsidestory
A recent TikTok has shed light on the experience for Sydney first home buyers, showcasing the intense competition for a budget unit in the Inner West.
The video, captioned “POV: Trying to enter the Sydney property market in 2026!!!” [sic] has gained over 61,000 views.
It documents a home open for a two-bedroom apartment in Enmore, which was initially priced at a guide of $700,000 but has since risen to $770,000 – a price guide $285,000 under the suburb’s $1.055m median for a two-bed unit.
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The two-bedroom unit on James St, Enmore
The inspection drew a huge line which spanned down the apartment block’s stairwell, with the video’s creator joking that “everyone in the Inner West had the same idea”.
“It’s sort of depressing to be one of many people sort of fighting over these shoebox sized apartments”, the creator said.
“But that’s the reality of the Sydney property market I suppose”.
One commenter who claimed to also be at the inspection described the queue to view the property as “madness”.
The video’s most liked comment was directed at the Prime Minister – a sarcastic “Thanks Albo” [sic].
A spokesman for the Minister for Housing, Homelessness and Cities told The Daily Telegraph in November that over the last few years, the 5 per cent Deposit Program had “successfully helped more than 200,000 Australians buy their own home sooner, while saving them thousands on expensive lender’s mortgage insurance”.
“It remains an incredibly robust program – of the more than 170,000 guarantees issued, less than 0.01 per cent have been paid out,” the spokesman said.
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