Here’s a curious thing happening in an otherwise cooling property market: first home buyers are surging in. New loan numbers jumped 6.8 per cent in a single quarter, powered by expanded government schemes, at the very moment values are falling in the big cities. So are these buyers making a smart move or a risky one? Here’s the plain-language guide.
What’s Driving the Surge
The number of new first home buyer loans rose 6.8 per cent to 31,783 in one quarter, the largest rise since late 2023, with the value of those loans up more than 15 per cent. Two government schemes are doing much of the work.
The expanded 5 per cent Deposit Scheme, now with unlimited places and higher price caps since October 2025, lets first home buyers purchase with just a 5 per cent deposit while avoiding lenders mortgage insurance, with the government acting as guarantor. Alongside it, the new Help to Buy shared-equity scheme adds another pathway. Together they’ve pulled a wave of first home buyers off the sidelines.
The Case That It’s Smart
There’s a genuine argument for buying now. Prices are soft in Sydney and Melbourne, clearance rates are weak, and buyers have more choice and negotiating room than they’ve had in years. Getting in with a 5 per cent deposit and no LMI, while sellers are realistic, can mean buying well in a buyer’s market rather than competing in a frenzy.
For long-term buyers, a home you’ll live in for years matters less about timing the exact bottom and more about securing a place while conditions favour buyers. If you’re buying to live, not speculate, a soft market is arguably a gift.
The Case That It’s Risky
But there are real cautions. Buying with a 5 per cent deposit means starting with very little equity, and if prices fall further, as forecasters expect for Sydney and Melbourne through 2026, you could quickly owe more than the home is worth, at least on paper. That matters most if your circumstances change and you need to sell.
“House prices could surge and mortgage defaults rise when a government scheme to help first home buyers begins,” experts have warned of scheme-driven demand.
There’s also an affordability trap: schemes that boost buying power in an undersupplied market can push prices up at the affordable end, the very segment first home buyers target. Cotality found affordable-home prices rose noticeably after the guarantee scheme expanded. And a small deposit means a bigger loan and higher repayments in a period when rates may not fall until 2027.
How to Decide
The honest answer depends on your circumstances, not the headline. Buy if you’re purchasing a home to live in for the long term, your finances are stable enough to withstand a further price dip or a rate rise, and you’ve stress-tested your repayments against higher rates. Think harder if your income is uncertain, you might need to sell within a few years, or you’re stretching to the absolute limit of your borrowing capacity. A 5 per cent deposit lowers the entry barrier but raises the risk if anything goes wrong. This is general information, not financial advice.
The Bottom Line
First home buyers surging into a falling market isn’t automatically smart or risky, it depends entirely on your situation. The schemes genuinely lower the barrier to entry, and a soft market offers real negotiating power. But a thin deposit in a market still falling carries real risk, so buy for the long term, stress-test your finances, and decide on your own numbers rather than the momentum of the crowd.
Epik Wire covers the property market in plain language for buyers, owners and families. Subscribe to our newsletter to stay informed.
