Market watchers are not expecting any substantial change in the housing market when the federal government's First Home Loan Deposit Scheme goes live next year.

Under the $500m scheme, 10,000 first-home buyers will be assisted by the government, enabling them to proceed with their home purchase with deposits of as little as 5%.

The scheme would likely be oversubscribed, said CoreLogic director of research Tim Lawless.

"We aren't expecting this program to make a substantial difference to overall first-home buyer participation rates considering the scheme is capped at 10,000 buyers," he said.

Also read: Housing minister says now is right time to buy

Drop in the ocean?

The cap is one of the major issues raised by market watchers. The scheme's cap equates to less than 10% of first-home buyers in the market over the past year.

"Ultimately, it's going to be pretty ineffective. It's only 10,000 guarantees a year, so that's a drop in the ocean really, compared to the problems of housing affordability for younger, poorer Australians," Grattan Institute's Brendan Coates told the ABC News program The Business.

Furthermore, the scheme's first-come, first-served basis of accepting applications could put some buyers at a disadvantage, said market watcher Daniel Ziffer in an analysis on ABC News.

"The grants will begin 1 January 2020 on a 'first come, first served' basis, preferring those who have a deal ready to go and are skilled in form-filling," he said.

Under the eligibility rules, single applicants should be earning less than $125,000 a year while couples should collectively take home $200,000 annually.

"Only about one in 10 people in Australia earn more than that, so it's not exactly targeted at poorer people," Ziffer said.

The federal government recently announced the price caps of the scheme. The table below summarises the proposed price caps based on state and location:

First Home Loan Deposit Scheme Price Caps










City or Large Regional Centre









Other Areas







Ziffer said these price caps are below the median house prices of capital cities. This means that the buyers are restricted to certain locations with values within the price caps.

"No property in Sydney, Newcastle, Lake Macquarie or the Illawarra, Wollongong over $700,000 will qualify. Nothing in Melbourne or Geelong over $600,000 fits either. If you want to live in Brisbane, the Gold Coast or the Sunshine Coast a $475,000 limit applies," he said. 

Also read: HIA supports “next steps” in Loan Deposit Scheme

Still a win

Despite the criticisms, many industry groups are commending the scheme for its potential impact on the housing market. Real Estate Institute of Victoria CEO Gil King said the scheme had created a lot of excitement across the housing sector. 

Given the upcoming implementation of the scheme, King said it could be the perfect time to sell homes for profit. 

"Our market will be boosted by new buyers, meaning further transactions in our community. Right now, is an amazing time for local sellers, with an increase in buyers we will need a lot more homes on the market," he said. 

Aside from assisting first-home buyers facing the deposit hurdle, the scheme could also boost the declining construction levels for new housing, said Property Council of Australia chief executive Ken Morrison.

"Getting these settings right, including keeping the focus on new housing construction, will be vital in ensuring the scheme is a winner for first home buyers and the housing sector more generally," he said.