MAJORITY GOVERNMENT:
What does Labor’s win in the 2025 Federal Election mean for first home buyers?
With Prime Minister Anthony Albanese and the Australian Labor Party securing a landslide victory in the 2025 federal election, Labor's housing policy is now set to become reality.
The re-elected government’s housing plan will have a significant impact on Australian first home buyers. Let's break down what Labor's victory means for first home buyers.
Expansion of the 5% deposit First Home Guarantee Scheme
The centerpiece of Labor's first home buyer policy is an expanded First Home Guarantee Scheme (FHGS), which will be in effect from 1 January 2026, as outlined in their election platform.
What does the First Home Guarantee Scheme do?
To summarise, what you need to know about the First Home Guarantee Scheme:
- First home buyers can purchase with just a 5% deposit, without paying Lender’s Mortgage Insurance (LMI)
- The government will guarantee 15% of the purchase price
What’s changing with Labor’s expanded version of the First Home Guarantee Scheme?
In the current version of the FHGS, there are household income caps (up to $125,000 for single households and $200,000 for couples), limits on available places, and city-specific or region-specific property price caps.
The new expansions from the ALP will involve:
- Removal of all income caps - so that any first home buyer is eligible
- Removal of all limits on available places
- An increase in property price caps, bringing the property price limits closer to median house prices in different cities.
New price caps now confirmed
With Labor's election victory, the following property price caps are now confirmed for the 5% deposit scheme:
Capital cities
All capital cities have seen increases in their price caps, with the exception of Darwin.
Regional areas
Regional centres will have the same caps as the capital cities of their states, while other regional areas will have lower thresholds, based on regional average housing costs. These regional centres are:
- NSW - Newcastle and Lake Macquarie, and Illawarra (including Wollongong)
- VIC - Geelong
- QLD - Gold Coast, and Sunshine Coast
100,000 new homes exclusively for first home buyers
Beyond the deposit scheme, Labor's victory means their $10 billion investment to build 100,000 homes exclusively for first home buyers will move forward. Construction will begin in 2026-27, with the first buyers moving in from 2027-28.
Housing Minister Clare O'Neil has confirmed that partnerships with state governments, developers, and community housing providers will be formed to deliver these homes, creating a dedicated pipeline of housing stock for first-time buyers.
What this means for aspiring homeowners
Labor's housing policy implementation will bring several key benefits:
- Faster path to homeownership: Saving a 5% deposit instead of 20% will cut years off many Australians' home buying timeline
- No more LMI: The expansion means many more first home buyers will no longer need lenders mortgage insurance, removing a significant cost barrier
- Less reliance on family support: The reduced deposit requirement decreases the need for the "Bank of Mum and Dad" to contribute
- Wider accessibility: The higher price caps ensure that even buyers in expensive markets like Sydney can benefit from the scheme
- Normal lending criteria still apply: While the deposit hurdle is reduced, buyers will still need to meet standard home loan requirements
Economic impacts to watch
The Labor Housing Minister, Claire O’Neill, cited Treasury modeling, claiming the plan would not significantly impact house prices as it targets "a pretty narrow band of new first home buyers." However, housing market interventions can have complex economic consequences, and expert economist opinions differ. While some economists have suggested this will increase price inflation in certain segments of the market, others suggest the increased housing supply could offset this.
Next steps for first home buyers
With Labor's housing policy now set to become reality, aspiring homeowners should:
- Keep the January 2026 implementation date in mind, if they wish to use the scheme
- Familiarise themselves with the price caps in their target area
- Ensure other financial factors are in order (stable income, good credit score, reducing any other liabilities)
Summary
Labor's election victory transforms their housing affordability proposals from campaign promises to upcoming policy. The 5% deposit scheme and dedicated housing supply initiatives represent significant changes for Australia's first home buyers, potentially opening the door to homeownership for many who previously faced insurmountable deposit hurdles.
Want to understand how these changes will affect your personal home buying journey? Our team can help you navigate the current market while planning for these policy implementations in 2026 and beyond.
