Over the last few months, Melbourne’s housing market has undergone a significant transformation. There is a huge surge in home loan pre-approvals for first-time buyers. New government policies, a range of exemptions and concessions are some of the reasons for it.
David McQueen, CEO of Loan Market, said that “the spike in activity in early 2025 reflected confidence among buyers that the cash rate had peaked”. (Source)
Melbourne’s property market is touching the sky, with some key suburbs recording as much as a 500% rise in the number of people planning to buy a house compared to last year. So, this is the right time to invest in the city as demand for buying a property is very high, which is expected to increase further in the coming months.
Ms Sachdeva said, “People who were stuck renting can suddenly buy in areas they’ve long aimed for. Buyers are confident again, and they’re moving quickly before prices rise.” (Source)
What Makes the Surge in Home Loan Pre-Approvals in Melbourne
The Australian Government is making home ownership more achievable for more people with new and expanded programs. Here are some of the impactful reasons why more and more people are planning to invest in the suburbs of Melbourne:
Lower interest rates
One of the first things behind the surge in buying property in Melbourne is the home loan interest rate cuts. The Reserve Bank of Australia (RBA) has cut the cash rate, which has improved borrowers’ capacity for a home loan. According to the major bank in Australia, there is approximately 7% rise in the borrowing capacity, giving buyers more confidence to buy a house in Melbourne, Victoria.
First home guarantee scheme
Another factor that attracts new property buyers in Melbourne is the government’s first-home guarantee scheme. It is valid for potential buyers of an owner-occupier home. To be eligible, you should not have owned property for at least the past decade and should be either an Australian citizen or a permanent resident.
From 1 October 2025, the scheme’s price caps have increased above the median property value in most regions of Australia. This led to a surge in pre-approvals for home loans to buy a property in Melbourne.
Low deposit scheme
With the launch of 5% deposits for all first home buyers, people gain confidence to achieve their dream of owning a property in 2025. This government scheme guarantees a portion of a buyer’s home loan in Melbourne, reducing the time it takes to save for a deposit.
Already, thousands of people have gained ownership through this scheme. Today, the expanded scheme means a first-home buyer in Melbourne can buy a $1 million home with just a $50,000 deposit.
Less need for lenders’ mortgage insurance
With just a 5% deposit, home buyers in Melbourne can get up to 25% of the purchase price from the Victorian Government in exchange for an equivalent share in the property. This will save you money by reducing or removing the need for lenders’ mortgage insurance.
First home owner grant
When people get a grant from the Government to buy their first house in Melbourne, they will not miss the chance to apply for pre-approvals. Yes, this is exactly what is happening, which is causing a surge in home loan pre-approvals in the city. Under the First Home Owner Grant, you will receive a payment of around $10,000 to help eligible first home buyers buy a new home in Melbourne, Victoria, to live in. It applies to newly constructed or never-occupied properties valued up to $750,000.
Reduced or no stamp duty
For first-home buyers buying a house for $600,000 or less, there is no stamp duty. If your home is valued between $600,000 and $750,000, the stamp duty is minimal. This helps buyers save some money and gives them a push to invest in Melbourne.
In addition, Ringwood’s strong transport links via the Eastern Freeway and Belgrave–Lilydale line, Box Hill’s education hub, and Hawthorn’s vibrant café and university have made Melbourne attractive to both homeowners and investors.
Executive General Manager Home Buying, Marcos Meneguzzi, said, “It’s encouraging to see more people feeling confident about their home buying options. The Aussie dream has long been anchored in home ownership, and this rise in conditional pre-approval activity reflects a renewed sense of optimism as borrowers respond to lower interest rates and increased borrowing power.” (Source)
And, according to Preeti Sachdeva, a broker at Loan Market Ferntree Gully, the policy changes had given first-home buyers their first genuine opportunity to enter well-established areas.
All in all, it is the best and right time to buy a property in Melbourne, especially for first-time buyers. Get benefits from the latest government schemes and own a home of your dream.
Are you planning to invest in Melbourne, but are afraid of making the wrong move in the growing housing market? If yes, Property Buyers Australia can help you with every step of buying land or a home in Melbourne and nearby suburbs. Whether you need guidance in finding the right location or negotiating a property price, we are happy to assist. Contact us today.
