From the 1st of October 2025, the Federal Government’s expanded 5% Deposit Scheme came into effect, allowing first-home buyers across Australia to purchase a property with only a 5% deposit and without paying Lenders’ Mortgage Insurance!
It’s been celebrated as a big win for housing affordability, but the reality is more complicated and could have far-reaching consequences for buyers, investors and tenants alike.
While the scheme opens doors for those previously locked out of home ownership, it also introduces new risks to an already overheated housing market.
As a team of long-serving property professionals, we’ve taken a closer look at what this policy means for Queensland families, and why the government’s good intentions may, unintentionally, add more pressure to the system.
The 5% Deposit Scheme and what it means for first-home buyers in 2025
Economics 101 tells us that when demand rises faster than supply, prices go up. This is exactly what’s happening with the new 5% deposit scheme.
With entry barriers lowered and no income or property price caps in place, a surge of first-home buyers is expected to flood the market. But the number of available homes, especially affordable entry-level properties, hasn’t increased to meet this new demand.
The result is more competition and increased prices.
Sellers, realising the influx of new buyers, will inevitably raise asking prices. This cycle benefits current property owners and developers, but makes it even harder for first-home buyers.
Experts warn this policy is likely to drive up demand rather than make housing more affordable, pushing prices higher for the very people it was meant to support.
Why the 5% Deposit Scheme may push property prices higher
A 5% deposit sounds great, but it means taking on a 95% loan-to-value mortgage.
This level of borrowing dramatically increases financial pressures. Monthly repayments are higher, and the margin for error is slimmer. If interest rates rise again, or a family faces job loss or unexpected costs, the risk of not being able to pay the mortgage becomes very real.
In an economic environment already defined by rising living costs and stagnant wage growth, the potential for financial strain can’t be ignored. What begins as an opportunity to own a home could easily become a long-term burden for households stretched to their limits. Some experts have even cautioned that the scheme may be setting up certain buyers for failure rather than financial security.
How low deposits could leave home buyers financially exposed
Another unintended consequence of the policy lies within the rental market. As property prices rise, many investors will see this as the ideal time to sell and capitalise on the renewed buyer demand. Every investor who sells an investment property to an owner-occupier removes one dwelling from the pool of available rentals.
In Queensland, where vacancy rates are already at critically low levels, any reduction in rental supply will place further pressure on tenants. Rents have already climbed sharply in recent years, with increases of over 20% in some parts of the state.
Fewer available rentals will only accelerate this trend, leading to more families struggling to find or afford accommodation. This could cause a rise in homelessness, which has already reached levels previously unseen in Queensland.
The ripple effect on Queensland’s rental market
The effects of the 5% Deposit Scheme could create a perfect storm. The influx of buyers drives up house prices, prompting investors to sell and reduce rental supply. As rents rise, more tenants feel forced to pursue ownership, often through high-risk borrowing made possible by the same scheme, further intensifying demand and fuelling another wave of price growth.
As demand keeps rising and homes become less affordable, the housing problem could get even tougher. The government’s plan to help people buy their first home might actually put more Queensland families under money pressure. For some, the challenge won’t just be buying a home… it will be keeping it.
How buyers, investors and tenants can navigate the 5% deposit market responsibly
At MacWell, we believe in giving our clients and community the know-how needed to make sound, sustainable decisions.
It’s vital for buyers to approach this new opportunity with caution and foresight, budgeting for interest rate fluctuations, avoiding overextension and seeking professional guidance before committing to a purchase.
For investors, this is a time to think strategically about long-term value rather than short-term gains. Selling may offer immediate profit, but maintaining rental stock supports both steady income and community stability. And for tenants, understanding these market forces is key to planning ahead and engaging early with property managers who prioritise fairness and transparency.
Why a balanced housing policy is the only way to fix Australia’s property crisis
The government’s 5% Deposit Scheme highlights the need for a balanced housing policy that stimulates supply as well as demand. Without investments in new, affordable housing and faster planning approvals, schemes like this may keep pushing prices up, widening the gap between Australians.
Queensland stands at a crossroads. This scheme will determine whether we move towards a fairer, more sustainable housing future, or stay caught in a cycle of rising prices, fewer rentals and growing hardship.
At MacWell, we believe people are at the heart of every good decision. Through shared knowledge and a community-first approach, we’ll help our clients face this changing market with clarity and confidence.
Contact Jason to learn more about how this scheme affects you.
