The Australian real estate market, particularly Melbourne's vibrant entry-level segment, is experiencing an extraordinary surge, propelled by the recently expanded Australian Government 5% Deposit Scheme. This significant policy shift has unleashed a wave of highly motivated first home buyers, intensifying competition and setting the stage for sustained price growth, presenting both opportunities and challenges for developers and real estate agencies.
Effective October 1st, the expanded scheme now allows first home buyers to purchase a home with a mere 5% deposit without incurring Lenders' Mortgage Insurance (LMI). Critically, the previous income thresholds have been removed, property price caps increased, and there is no longer a limit on the number of places available. This comprehensive liberalisation of the program, which has already assisted 240,000 buyers across its various streams since 2020, is forecast by Treasury modelling to contribute to a 0.5% increase in property prices over the next six years.
Unprecedented Demand and Shifting Buyer Dynamics
The immediate impact has been dramatic. Industry observers report "really, really strong" attendance at open for inspections for properties under the scheme's cap. Where a typical Sunday inspection might previously draw 15 parties, agents are now seeing 20 or more. This influx is translating directly into fierce auction competition, with homes routinely selling above their reserves. One recent example saw a property fetch $1,205,000 against a reserve of $1.14 million, demonstrating buyers' willingness to "stretch a little bit more" given the financial assistance.
This heightened activity wasn't solely a post-October 1st phenomenon. A palpable sense of urgency began to build from late August. Prospective buyers, fearing that property prices would "continue to drive north" due to the impending expansion, actively rushed to secure homes before the scheme officially launched. This pre-emptive purchasing led to a period where buyers "overpaid at auctions just to get in," preferring to secure a property immediately rather than face potentially higher prices and increased competition months later.
Melbourne's Market "On Steroids"
Melbourne specifically has felt the full force of this demand. Buyer's agents in the city have reported a significant increase in inquiries from first home buyers, with budgets spanning from $650,000 up to Melbourne's scheme cap of $950,000. Many buyers, even those who could afford more, are strategically targeting properties under this cap to avoid LMI. This has created what some experts describe as a "market on steroids" for properties under $1 million.
Auctions that once attracted one or two bidders earlier in the year are now routinely seeing five to seven, signalling a dramatic shift in market strength. The scarcity of available homes for sale is exacerbating this situation, creating queues at open homes reminiscent of previous "hot market" periods.
Outlook and Strategic Imperatives for Developers and Agencies
This pulling forward of demand is expected to keep the lower end of the market "extremely strong if not hot going into 2026." The current environment, while presenting clear opportunities for sales, also demands strategic navigation from developers and partner agencies. Understanding the nuances of this urgent, government-assisted buyer pool—their motivations, price sensitivities, and the competitive landscape—is paramount to successful project delivery.
For developers, aligning new projects with the sweet spot of this demand, particularly within Melbourne's specific scheme caps, is crucial. For real estate agencies, access to deep market insights and robust sales channels will be key to effectively servicing this dynamic buyer segment.
As Melbourne's premier master property agency, Axtra Property is keenly observing these unfolding market dynamics. With an intimate understanding of local trends and an extensive network, Axtra Property is uniquely positioned to interpret these shifts for developers and collaborating agencies. By providing strategic counsel and connecting projects with this highly motivated buyer base, Axtra Property enables partners to capitalise effectively on Melbourne's current, unprecedented market momentum. The time is ripe for strategic partnerships to navigate this energized landscape and realise significant project success.