Tens of thousands of Melbourne homes eligible for the Australian government’s 5 Per Cent Deposit Scheme have lost value since October. Picture: Jake Nowakowski.
Ill-fated Albanese government efforts to help Melbourne first home buyers have left worrying numbers trapped with homes worth up to $96,000 less than they paid.
New analysis shows more than 30,000 properties eligible under the Australian government’s 5 Per Cent Deposit Scheme have had five figures wiped off their value in just 10 months.
A report from real estate research platform SuburbData estimates about 85 per cent of those that fit into the parameters have experienced median prices falls of between $7965 and $96,722, between October and August’s end amid wider market pain.
RELATED: Victoria first-home buyers: Why interstate buyers are moving to Melbourne
Super regret hits millions as first-home buyers face $20,000 deposit shortfalls
Victorian first-home buyers forced to repay millions in grants and tax
Prime Minister Anthony Albanese’s government raised the scheme’s price cap to $950,000 for Victoria’s capital in October last year and removed caps on the numbers of first-home buyers able to use it – as well as income thresholds.
Since then, nearly half of the Melbourne residences eligible under the program have lost more than their initial 5 per cent deposit, averaging a $59,284 loss for each address.
With the Reserve Bank widely expected to raise rates when it meets next week, there are fears the increased financial pressure will come as a shock to first-home buyers who used the scheme and others already struggling to pay their mortgage.
SuburbData director and property analyst Jeremy Sheppard says although Melbourne had the highest volume of properties at risk of negative equity compared to other capital cities, it’s likely to see a future recovery in prices.
This Doncaster unit sold for $565,000. Doncaster is one of the suburbs in Manningham’s west, the top Melbourne area for losses under the 5 Per Cent Deposit Scheme.
According to the report, Manningham’s west, which covers the suburbs of Bulleen, Doncaster, Templestowe and Templestowe Lower, was the top Melbourne area where the scheme’s participants could have lost value from their home – typically, $96,722 a property.
Other high loss areas for buyers who used the scheme included Stonnington’s west, Glen Eira, Boroondara and Dandenong.
SuburbData director Jeremy Sheppard said another interest rate hike could push some homeowners over the edge and even lead to increased mortgage defaults.
Mr Sheppard said a major issue with the scheme was it had pushed up prices for first-home buyers after the October expansion, only for separate government reforms in May’s national budget to later drive prices down.
He said this had all occurred during a climate of rising interest rates.
“First-home buyers who had already committed to the scheme before May are now bearing the brunt of negative equity, it’s a little unfair,” Mr Sheppard said.
Canstar.com.au’s data insights director, Sally Tindall, says it’s important for struggling mortgage holders to call their bank as soon as possible.
This Windsor apartment changed hands for $470,000. Along with Armadale, Prahran, Toorak and part of South Yarra, it’s in Stonnington’s west, the second-highest area for losses under the 5 Per Cent Deposit Scheme.
A spokesperson for Minister for Housing Claire O’Neil said the scheme had helped 280,000 first-home buyers get a home, saved them $2.3bn in lenders mortgage insurance costs and that only 15 claims had been paid out – less than 0.01 per cent of the total – and none since its expansion in October last year.
“Without this scheme, many first home buyers wouldn’t be able to enter the market at all,” the spokesman said.”
Financial comparison and expert ratings site Canstar.com.au’s data insights director, Sally Tindall, said buyers with a 5 per cent deposit had a much higher risk of falling into negative equity than buyers with more equity behind them.
Negative equity is when the debt owed on a loan is higher than the residence’s current market value.
Ms Tindall said that both borrowers who bought when interest rates were much lower, pre-Covid, and newer borrowers would have experienced a shock when the RBA raised rates back in February, March and May, even if they had budgeted for it.
Melbourne regions where homes bought under the 5 Per Cent Deposit Scheme have gained value include Bayside, Darebin’s south and Melbourne’s CBD. Picture: Ian Currie.
Prime Minister Anthony Albanese’s government raised the 5 Per Cent Scheme’s price cap to $950,000 for Melbourne buyers in 2025. Picture: NewsWire/Martin Ollman.
She noted data from the big four banks indicated about 13 per cent of Australian borrowers were paying the bare minimum on their mortgage and did not have a buffer such as an offset account.
Ms Tindall said these buyers would struggle most if interest rates were increased.
“It’s only a real problem if you can’t pay your mortgage, so if you can keep your head down, keep your mortgage payments up, put every spare dollar that you have into your offset account or as extra payments into your mortgage, you should be able to work your way out of that financial position and hopefully back into a position where you can actually refinance and things like that,” she added.
“Obviously it depends on keeping up your mortgage repayments and it will also depend, in some regards, as to what happens with property prices from here on in.”
Ms Tindall said banks routinely examined potential home loan recipients’ finances to ensure they could cover mortgage repayments if interest rates rose 3 per cent, before approving them for a loan.
Eastern Property Advocates founder and director Amir Sharifi says although the 5 Per Cent Scheme is capped at $950,000, buyers shouldn’t pay that just because it’s there.
Eastern Property Advocates founder and director Amir Sharifi said those using the 5 Per Cent Scheme should treat the $950,000 cap as a spending ceiling, rather than a target.
He said this was especially important for young families planning on having children, who often added significant expenses to a budget.
“If their home value reduces a lot and the borrower is in negative equity, they still owe the loan,” Mr Sharifi said.
“A fall in a value doesn’t automatically mean they must sell, but selling or refinancing may become harder.”
Areas such as Wyndham, Melton and Bacchus Marsh, Tullamarine and Broadmeadows, and Whittlesea and Wallan, were among those with the highest numbers of buyers who used the 5 Per Cent program. Picture: Jake Nowakowski.
Although he’s not a mortgage broker, Mr Sharifi said he would advise buyers to ask their lender or broker what their potential repayments would look like under a higher interest rate, as well as check for any owners’ corporation fees.
“They should also should budget for council rates, insurance, ongoing maintenance, any necessary renovation or upgrades,” Mr Sharifi explained.
His other advice included building a savings buffer after settling on a home and regularly checking whether a lender could offer a better rate.
Mr Sharifi said anyone struggling with their mortgage to contact their lender, and seek advice, sooner rather than later.
Melbourne doctor Josh is thinking about using the 5 Per Cent Scheme to buy an apartment in the CBD. He’s hoping to secure a one- or two-bedroom home with a car park.
A doctor at a Melbourne public hospital, Josh, said he was considering using the 5 Per Cent scheme to buy a sub-$600,000 CBD apartment, although he might opt to rent instead.
Josh said although the prospect of negative equity had crossed his mind, he did not think potential price decreases within his particular price bracket would be too substantial.
“One thing that I’m going to definitely going to be leveraging a lot is the offset account,” he added.
“And then I guess I will probably budget a little bit more, so there’s a buffer just in case.”
Melbourne: Losses And Gains Under The 5 Per Cent Scheme
Region |
No. of properties bought with a 5% deposit |
Median price |
Typical gain or loss $ |
Growth or loss as a % |
| Manningham – West | 240 | $628,500 | -$96,722 | -15.4 |
| Stonnington – West | 450 | $525,250 | -$72,774 | -13.9 |
| Glen Eira | 517 | $570,000 | -$72,471 | -12.7 |
| Boroondara | 376 | $600,000 | -$76,278 | -12.7 |
| Dandenong | 1093 | $717,000 | -$71,533 | -10 |
| Kingston | 524 | $700,000 | -$69,050 | -9.9 |
| Maribyrnong | 876 | $600,000 | -$57,886 | -9.6 |
| Yarra Ranges | 724 | $795,000 | -$70,629 | -8.9 |
| Monash | 352 | $700,000 | -$57,416 | -8.2 |
| Brunswick – Coburg | 658 | $571,250 | -$44,806 | -7.8 |
| Knox | 707 | $800,000 | -$62,319 | -7.8 |
| Whitehorse – East | 117 | $765,000 | -$53,342 | -7 |
| Manningham – East | 21 | $795,000 | -$53,428 | -6.7 |
| Maroondah | 707 | $765,000 | -$44,093 | -5.8 |
| Casey – North | 893 | $778,000 | -$43,396 | -5.6 |
| Keilor | 236 | $817,500 | -$45,364 | -5.5 |
| Sunbury | 691 | $700,000 | -$38,766 | -5.5 |
| Tullamarine – Broadmeadows | 2331 | $700,000 | -$36,837 | -5.3 |
| Whittlesea – Wallan | 2696 | $714,500 | -$28,694 | -4 |
| Mornington Peninsula | 891 | $765,000 | -$30,698 | -4 |
| Yarra | 484 | $530,000 | -$18,596 | -3.5 |
| Wyndham | 3511 | $670,000 | -$19,812 | -3 |
| Casey – South | 2077 | $742,000 | -$21,796 | -2.9 |
| Moreland – North | 872 | $724,000 | -$20,105 | -2.8 |
| Banyule | 789 | $750,000 | -$20,330 | -2.7 |
| Hobsons Bay | 540 | $755,000 | -$20,291 | -2.7 |
| Darebin – North | 700 | $700,000 | -$18,255 | -2.6 |
| Frankston | 1186 | $775,000 | -$18,695 | -2.4 |
| Melton – Bacchus Marsh | 2290 | $645,000 | -$12,242 | -1.9 |
| Port Phillip | 730 | $554,500 | -$7838 | -1.4 |
| Essendon | 518 | $513,000 | -$6030 | -1.2 |
| Whitehorse – West | 332 | $571,000 | -$6697 | -1.2 |
| Cardinia | 1117 | $712,000 | -$7965 | -1.1 |
| Brimbank | 1378 | $725,000 | $2620 | 0.4 |
| Nillumbik – Kinglake | 100 | $836,000 | $26,145 | 3.1 |
| Melbourne City | 1863 | $480,000 | $47,592 | 9.9 |
| Bayside | 177 | $655,000 | $72,491 | 11.1 |
| Stonnington – East | 24 | $521,000 | $66,695 | 12.8 |
| Darebin – South | 289 | $580,000 | $87,077 | 15 |
Source: SuburbData, covering SA3 areas defined by the Australian Bureau of Statistics, usually with a population of between 30,000 to 130,000 people. Median price includes houses, units, townhouses, apartments and land priced at $950,000 or below. Typical loss estimated per property, October 2025 to August 2026.
Additional reporting by Aidan Devine
Sign up to the Herald Sun Weekly Real Estate Update. Click here to get the latest Victorian property market news delivered direct to your inbox.
MORE: Agents’ warning after Melbourne assault, attempted car theft