Prime Minister Anthony Albanese has announced a significant initiative aimed at assisting young people and first-time home buyers in Australia to achieve home ownership more promptly. The key component of this initiative is the fast-tracked 5 per cent deposit scheme, which allows first-time buyers to purchase homes with a deposit of only 5 per cent, rather than the usual 20 per cent.
Initially scheduled to commence in 2026, this scheme will instead start on October 1, 2025. It is designed to “level the playing field” for young Australians, many of whom feel excluded from the housing market due to the rising costs associated with purchasing a home. Housing Minister Clare O’Neil pointed out the challenges faced by an entire generation who have been locked out of home ownership, and emphasized the need for change.
The essentials of the 5 per cent deposit scheme mean that potential home buyers will need a deposit of just $50,000 for a $1 million home, significantly reducing the time required to save for a deposit. The Albanese government will underwrite part of the home loan to facilitate these lower deposit requirements. Notably, participants in the scheme will also avoid lenders mortgage insurance, potentially saving tens of thousands of dollars.
There are no caps on applicants or income limits, allowing all first home buyers across Australia to apply, irrespective of their earnings. Additionally, the property price caps will increase to match the rising property values in major cities. For example, in Sydney, the cap will rise from $900,000 to $1.5 million; in Melbourne, from $800,000 to $950,000; and in Brisbane, from $700,000 to $1 million.
Research indicates that it currently takes an average of four years and ten months for a couple aged 25 to 34 to save a 20 per cent deposit for an entry-priced home. However, this timeframe is expected to decrease significantly with the reduced deposit requirement. For instance, a scheme that allows for a 2 per cent deposit has already shown that it can save individuals an average of four years and three months in their savings journey.
While the initiative has promise, experts warn there may be unintended consequences. Mortgage broker Siddhartha Bajracharya expressed concern that the increased accessibility could drive property prices even higher amidst low supply, suggesting that the government should also focus on boosting the construction and availability of new homes to balance the market.
In conclusion, the 5 per cent home deposit scheme could provide a crucial stepping stone for many Australians seeking home ownership, though its implementation must be managed carefully to mitigate potential increases in housing prices.