The dream of homeownership is central to Australian identity, but it still feels out of reach for many. For the last few years, rising prices have created affordability and loan serviceability challenges. Conditions in many localities may now be softening, but serviceability remains a challenge as interest rates increase.
From grants to government as stakeholder
Australia has a long history of assisting first home buyers, with government support expanding significantly over the past 25 years. What began as a $7000 grant for first home buyers purchasing new, introduced to offset the GST, has evolved into more direct interventions designed to help buyers enter the market sooner.
Federal and state governments expanded assistance in response to rising prices, with several new or enhanced schemes taking effect in 2025. Schemes now include shared equity and government-backed lenders' mortgage insurance (LMI). Government is no longer just providing subsidies; it is now a direct financial stakeholder in the housing market.
The key federal schemes are Help to Buy and the Home Guarantee Scheme, which moved to a new, uncapped model from 1 October 2025. This more generous guarantee has attracted a larger number of first home buyers.
Where the risk sits
Large-scale first home buyer support has historically brought demand forward and accelerated prices. As a result, new shared equity and LMI-backed schemes are exposed to potential losses in a downturn, particularly as buyers may be purchasing with less personal equity.
Scheme-eligible properties that appeal to first home buyers are potentially concentrated in more vulnerable markets, which have historically shown slower capital growth and are more susceptible to negative equity when conditions soften.
Conditions favour first home buyers in several markets
As prices ease, entry points are becoming more accessible. A pullback in investor activity is also reducing competition at the lower end of the market, where first home buyers and investors typically compete most directly.
Weighing up the trade-offs
First home buyers need to carefully assess competing factors:
A lower purchase price today may be attractive, but is it an indicator of limited capital growth?
Properties in fringe locations are more affordable, but will owners face significantly higher living costs while fuel prices remain high?
First home buyers should seek professional advice on asset selection, as poor property selection could expose them to elevated financial risk if interest rates continue to rise. A good starting point is this month's Month in Review, where HTW's local experts detail entry-level opportunities in markets across the country.