House prices are skyrocketing in unexpected places, and it’s not just the usual suspects. While we often hear about booming markets in wealthy suburbs, the latest data reveals a surprising twist: inner cities and fast-growing towns are leading the charge in price surges, thanks to the federal government’s expanded 5% deposit scheme. But here’s where it gets controversial—is this policy helping first-time buyers or simply fueling an already overheated market?
A closer look at the numbers from data firm Cotality paints a fascinating picture. In October, homes eligible for the first home buyer scheme—those below the price caps—saw prices grow 20% faster than homes above the caps (1.2% vs. 1%). While this trend isn’t entirely new—the lower end of the market has outpaced the top end for nearly two years—October’s results are among the most dramatic in the past 16 years, landing in the top sixth of recorded growth.
And this is the part most people miss: certain regions experienced even more pronounced gaps. Inner Melbourne, Perth, northern Brisbane, Darwin, Geelong, the Central Coast, Wide Bay, and Sydney’s inner city and northern beaches saw the most significant disparities. For instance, Melbourne’s inner east—home to suburbs like Kew, Hawthorn, Box Hill, and Doncaster—recorded the largest difference, with eligible homes growing over four times faster than ineligible ones (1.7% vs. 0.4%).
Here’s a breakdown of the areas with the biggest discrepancies in October:
| Area | Homes Below Price Caps | Homes Above Price Caps |
|-------------------------|----------------------------|----------------------------|
| Melbourne — Inner East | 1.7% | 0.4% |
| Perth — Inner | 1.8% | 0.8% |
| Sydney — Northern Beaches | 0.9% | 0.0% |
| Sydney — Eastern Suburbs | 1.4% | 0.5% |
| Darwin | 2.0% | 1.3% |
| Sydney — North Sydney & Hornsby | 0.3% | -0.3% |
| Geelong | 1.2% | 0.6% |
| Brisbane — North | 1.9% | 1.3% |
| Central Coast | 0.9% | 0.4% |
| Wide Bay | 0.9% | 0.4% |
Cotality researchers Thomas Clarkson and Eliza Owen caution against drawing direct links between the scheme and price hikes, noting that “many factors are pushing the market higher.” However, they acknowledge localized impacts, particularly in “desirable” areas. But here’s the question: Is this scheme truly helping first-time buyers, or is it inadvertently pricing them out of the very market it aims to support?
Labor argues the results are “modest,” aligning with Treasury’s unpublished modeling, which predicts only a 0.6% price increase over six years. Meanwhile, the government reports that 5,778 homes were purchased by first-time buyers in October using the guarantee—about one in 10 sales. Yet, this figure is only 1,800 higher than the previous year, when income caps were still in place.
Housing Minister Clare O’Neil told the ABC, “This program is working… but only bringing a moderate number of new buyers into the market in this first month.” In contrast, Liberal housing spokesperson Andrew Bragg claims the scheme is “driving demand at the low end and inflating entry-level prices.”
Interestingly, standalone houses saw faster growth (1.3%) than units (1.0%) under the scheme, a trend consistent with historical data. However, Hobart and Canberra bucked the trend, with homes above the price caps outperforming those below.
So, what do you think? Is the 5% deposit scheme a lifeline for first-time buyers or a double-edged sword? Share your thoughts in the comments—let’s spark a conversation about the future of housing affordability.
