Property frenzy and FOMO: Prices soar as buyers rush ahead of FHB scheme

The First Home Guarantee scheme, which starts on Wednesday, 1 October, allows all first home buyers to benefit from a 5 per cent deposit without mortgage lender insurance, removing place and income caps.

REBAA president Melinda Jennison said that since the announcement, home buyers across the country have begun panic buying to enter the market before the wave of first home buyers increases competition further.

“Many buyers are reportedly panicking, with some purchasing sight unseen or overpaying to secure a property before 1 October.”

“Properties that were selling for $750,000 last month are now selling for close to $800,000,” Jennison said.

She said that, due to the buyer’s FOMO, home prices have risen in many areas, and that the scheme will be limited if the stock supply does not increase.

“What was $800,000 will soon be $900,000, which will make it even more difficult for first-timers to secure finance for a home – even with the scheme’s 5 per cent deposit on offer,” she said.

“Markets are already in frenzy, let alone what the next few months will bring once the scheme has started.

“Property buyers need to calm down, stick to their budgets, and seek out expert advice from professional buyer’s agents to ensure they don’t overpay because of their fear of missing out.”

Across the country, REBAA said the phenomenon has been similar.

REBAA NSW’s Linda Johnson said agents have seen a surge in queues at inspections, with negotiations increasing and faster sales, as buyers exhibit a sense of FOMO and panic in the air, with emotions running high.

“The onset of this competition has driven prices to set new records in some areas and shortened days on market,” Johnson said.

“We have seen an increase in both investors and first home buyers looking for entry-level family homes, as close to major centres as possible, with capital growth and getting into particular hotspots before it’s too late being the main focus.”

In Victoria, the peak body has noticed an increase in activity among first-time buyers over the past month, particularly for properties under $900,000, including two-bedroom units and townhouses in inner- and middle-ring suburbs.

REBAA said the increased demand has been driving faster pre-approvals, stronger auction participation, and heightened competition, pushing up price guides.

Similarly, in Queensland, REBAA noted a rise in demand, with an increase in direct enquiries from first-home buyers, particularly in the $650,000 to $800,000 price bracket.

“First home buyers are proving competitive against investors, particularly given the low stock levels and limited quality of available properties,” REBAA Queensland’s Melinda Granzien said.

“Medium- to high-quality properties are moving fast, with many going under contract within a day of listing and, in some cases, buyers are submitting offers sight unseen in order to secure a property quickly or overpaying.”

In Western Australia, REBAA said the lack of listings has been putting pressure on prices and increased competition, especially in the inner city suburbs where buyers can find dwellings in their budgets.

REBAA Western Australia state representative Peter Gavalas said competition has been tough with homes under $750,000 receiving between 10 and 20 offers.

“The expectation is we will see more activity in the market below $850,000 after 1 October, but we also expect to see more properties come to market at this time trying to capture this market,” Gavalas said.

REBAA South Australia’s Jess Elam said that first-time buyers in Adelaide have become more active and confident, with stronger competition for homes priced from $600,000 to $800,000, especially in southern suburbs like Seaford and Aldinga Beach.

She said the expanded scheme eligibility is expected to boost demand across more suburbs, with some previously out-of-reach suburbs coming back on first-time buyers’ radars.

“With the new changes, I expect that fringe and inner-ring areas, especially in the northern and southern suburbs, will see increased interest,” Elam said.

“With more buyers eligible and competition rising, price pressure is likely, particularly at the lower end of the market.”

What can first-time property buyers purchase in today’s market?

With property prices increasing, the real question is how much an average-wage buyer can actually afford in today’s market?

A recent Canstar.com.au simulation estimated borrowing capacity for a single person or couple on an average salary of $104,807 with no debts, no dependents, and minimal expenses.

The analysis showed that a single person earning the average full-time wage, benefiting from a 5 per cent deposit could, depending on the lender, spend up to $573,684 on a home, excluding stamp duty and additional fees.

A couple earning the average wage could potentially borrow around $1,090,000, meaning that with a 5 per cent deposit, they might afford a property valued at approximately $1,147,000.

Currently, Sydney remains the most challenging city for first-time buyers, with a median-priced unit at $873,838, while Darwin is the most accessible at $393,254.

Melbourne, Adelaide, Perth, and Canberra sit in the mid-range, with median unit prices ranging from $594,813 to $624,821, while Brisbane is slightly higher at $740,992.

Hobart, sitting at $551,149, offers relatively better affordability.

According to the analysis, a single-income first-time buyer could not afford a median-priced unit in most capital cities, but could only purchase a median-priced property in Hobart or Darwin.

A dual-income couple on average wages might manage to buy a median-priced apartment in all capital cities, but purchasing a house would be challenging, as median house prices exceed the scheme’s property price caps across every capital city.

Canstar.com.au data insights director Sally Tindall said buyers should ensure they can comfortably meet repayments and remember that the property ladder has rungs for a reason, being perfectly fine to start at the bottom.

“For many first home buyers, the scheme could be the key to ownership, but it’s vital to stress-test your budget and borrow only what you can comfortably afford in real life, not just on paper.

“The reality is, most first home buyers will have to compromise on size, location or both to make that first step into the market,” Tindall concluded.