‘Buyers feel like they can stretch more’: Home purchase help fuels competition

First home hopefuls have been out in force on the first weekend since a government assistance scheme expanded, and several buyers rushed to purchase earlier and beat the competition.

The influx of buyers could put upward pressure on prices for entry-level properties, buying and selling agents said.

From October 1, first home buyers can purchase a home with a 5 per cent deposit without paying lenders’ mortgage insurance, regardless of their income, if they use the newly renamed Australian Government 5% Deposit Scheme. Previously, only buyers under set income thresholds were eligible. The eligible property price caps have increased and there is no longer a limit on the number of places available.

Since it began in 2020, 240,000 buyers have used the program across its streams for first home buyers, new home buyers, family home buyers and regional home buyers. Treasury modelling forecasts an increase of 0.5 per cent in property prices over the next six years.

Ray White NSW chief auctioneer Alex Pattaro said attendance at properties open for inspection priced under the cap was “really, really strong” last weekend. His colleague had 20 parties through a Sunday inspection of a home in Riverstone; normal attendance would be closer to 15.

He said a home sold in the same suburb this weekend to a young family for $1,205,000 against a reserve of $1.14 million.

SOLD - $1,205,000

23 Cassie Avenue (Grantham Farm), Riverstone NSW 2765

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“People just anticipate the market is going to keep going up. This grant in that middle market has just created that urgency,” he said.

“Buyers feel like they can stretch a little bit more because that grant is in play.”

But he noticed buyers trying to purchase earlier, from about late August, before the scheme expanded.

“The first home buyer flurry of activity started before the first of October, in fear that property prices will continue to drive north, because of that extra grant. While there is a great grant, buyers are just going, ‘well, if I buy after the first of October, my grant is going to be minimised because property prices will go up’,” he said.

In Melbourne, buyer’s agent Wendy Chamberlain has fielded an increase in inquiries from first home buyers with budgets from $650,000 up to Melbourne’s $950,000 cap.

Some could afford to pay more but they wanted to spend $950,000 or less to save on lenders’ mortgage insurance, she said. She also had clients keen to purchase before October 1.

“There has really been a sense of urgency in the market,” she said. “Homes that would have cost you $950,000 are going to cost you over $1 million.”

She has noticed some auctions attracting five to seven bidders that she thought might have drawn one or two earlier in the year.

“We’re definitely seeing more strength in the market and that first home buyer bracket is out there looking.”

Buyer’s agent Michelle May, who has been fielding strong inquiries, said there had not been enough homes for sale.

“I was out on the weekend – it was very busy,” the Sydney-based agent said. “It was what we have seen in previous periods where it’s such a hot market, so people queueing, lining up for properties before they open up.”

She urged buyer caution, especially if they are looking at new or off-the-plan properties that risk falling in value.

Buyer’s agent Rich Harvey said his team had noticed a “dramatic increase” in attendance at open homes and he said inquiries were up, not only in Sydney, but up and down the east coast. His Melbourne colleagues said the market was now on steroids under $1 million, and that there had been a dramatic jump in attendance at open homes and the number of bidders at auction.

“It’s adding fuel to the fire because it’s pulling forward demand that was going to be there down the track,” the chief executive of propertybuyer.com.au said.

“The lower end of the market will be extremely strong if not hot going into 2026.”

He had many investors trying to purchase before the first home buyer scheme expanded because they knew there would be competition, pushing up prices for lower priced properties once it began.

Dion Marsden of Marsden Buyers Agents had a rush of inquiries a couple of months ago that were not using the scheme but were trying to purchase before new buyers came to the marketplace. Since October 1, first home buyer inquiries have been quieter.

“It was probably a fear that buyers had that the marketplace would get out of reach. Because of that, they rushed and made decisions probably quicker than what a lot of them would have liked,” he said.

“We saw a lot of buyers overpay at auctions just to get in, just so they didn’t have to overpay at auction in three months’ time.”