Retail prices, rising rents and tight supply have made it harder than ever for first home buyers to break into the Melbourne property market, but updates to the Australian Labor Party’s housing plan are creating new opportunities.
Here’s a quick look at:
A simplified breakdown of Labor’s housing plan
Housing was a key issue during the 2025 election. Now it has been re-elected, the Labor Government is looking to introduce measures aimed at making home ownership more accessible, especially in competitive markets like Melbourne.
New initiatives target the biggest barriers for first home buyers: upfront costs, housing supply and incentive eligibility limits. They include the following:
Reducing upfront costs with a 5% deposit guarantee
Labor is expanding the First Home Guarantee, allowing all first home buyers to enter the market with just a 5% deposit. This planned expansion removes previous income caps and opens the scheme to more buyers. While it has been possible to buy with a 5% deposit in the past, the guarantee means first home buyers will avoid paying Lender’s Mortgage Insurance (LMI), which is a significant saving (LMI can cost upwards of $30,000). The change, which is set to be introduced from January 2026, lowers the entry barrier for aspiring first-time homeowners who have secure incomes but struggle to save a 20% deposit.
Expanding access through 100,000 new homes
Labor has committed to investing $10 billion in building 100,000 new homes across Australia, exclusively available to first home buyers. The intention is for these homes to address housing supply pressures and create more affordable options. While the exact sites are not confirmed, Melbourne is likely to see development in growth areas like the outer north and west, where infrastructure and demand continue to rise.
Raising the price cap to match Melbourne’s market
To qualify under the First Home Guarantee, you’ll be able to purchase a Melbourne home worth up to $950,000 (the amount is different in other cities). This limit reflects Melbourne’s property market and gives first home buyers access to a wide range of homes; from inner-city apartments to family-sized homes in outer suburbs. It’s a notable increase from previous caps and better reflects the city’s actual house prices.
How Labor’s policies will help first home buyers in Melbourne
These policy updates may sound promising on paper, but how do they actually improve your chances of buying a home in Melbourne’s current market? Here’s where the practical impact starts to show.
Step into the market sooner with a smaller deposit
In the current property market in Melbourne, housing prices of around $950,000 are common. Therefore, saving a 20% deposit (or around $190,000) is out of reach for many first home buyers.
Under Labor’s plan, eligible buyers can enter the market with just 5% down (or around $47,500). This significantly lowers the upfront barrier and should allow young professionals and couples to buy sooner.
Avoid costly extras that stretch your loan
Buyers usually require Lender’s Mortgage Insurance (LMI) when they have less than a 20% deposit. In Melbourne, this can add an extra $20,000 to $23,000 to the overall cost of a home loan. By removing the need for LMI, the First Home Guarantee makes buying more affordable and reduces the long-term cost of the loan.
Get better access to brand-new homes before investors crowd in
With 100,000 homes set aside nationwide for first home buyers, Labor’s plan helps reduce competition with investors. This will give first home buyers better access to new, quality housing without inflated prices driven by investor bidding.
What first home buyers in Melbourne should do, starting now
If you’re a first home buyer in Melbourne, now is the time to prepare. The first step is to speak with a mortgage broker who understands the 5% deposit guarantee and can help you begin the pre-approval process. Your broker can guide you through eligibility, paperwork and lender requirements, ensuring you’re in the best position when incentives become available.
If you’re starting to shop for your first home, focus your property search on homes under $950,000, the expected cap for Melbourne. Although Labor’s plan removes income caps, price thresholds still apply, so it’s important to confirm that any home you consider fits within the new scheme’s criteria.
You should also keep a close eye on the supply and timelines for developments tied to Labor’s 100,000 home commitment. These homes may take time to roll out, so aligning your finances and plans around expected completion dates will help avoid disappointment.
It’s also wise to stay financially disciplined. Continue to track your spending and put savings away as lenders will still want to see evidence of good financial ‘health’, and the larger deposit you have, the less you will have to repay.
You may also want to start exploring shared equity options like the Help-to-Buy shared equity scheme, which may bring added flexibility and affordability.
Buy Your First Home in Melbourne with Expert Mortgage Advice
With these changes for first home buyers now on the table, it’s a good time to contact a brokerage firm like the experts at Lend & Co in Melbourne. We can help you understand the opportunities available to first home buyers and prepare to strike when the time is right.
Want to know more? Book a strategy call with Lend & Co today.
