The Victorian government is facing calls to overhaul its main support scheme for first-home buyers. Picture: NewsWire / Andrew Henshaw.
The Victorian government has been warned its main first-home buyer support scheme is outdated and driving prices up in Melbourne’s few remaining affordable suburbs.
The state’s top real estate industry group is now calling for price caps on the state’s first-home buyer stamp duty reduction scheme to be reviewed, noting removing or raising the cap could spread demand and reduce upward pressure on home values for lower price brackets.
New analysis by the Real Estate Institute of Victoria shows that the most common sale price across the city last year was $600,000 with almost 1200 sales — the current cap of the Victorian government’s full stamp duty concession for first-home buyers.
RELATED: Victorians’ brutal choice between health and home revealed
‘Shattered’: Cheap rent a myth in regional Victoria
Vic housing crisis: cancer patient forced to live in car
It was followed by $700,000 and $650,000.
Market entrants pay only a fraction of stamp duty for homes up to $750,000 in value.
Latest State Revenue Office data shows more than 42,000 concessions were provided for first-home buyer sales in the past financial year, making it the state’s biggest support program for first-home buyers.
The REIV notes that while the $600,000 cap covered a substantial chunk of the market when it was introduced in 2017, only 23.1 per cent of homes sold in Melbourne last year fell on or below the figure.
Latest data shows that across Melbourne’s inner, middle and outer rings, there is no longer a single band where even units have a median price below $600,000.
Industry groups have warned first-home buyers are now facing significant competition and even price increases as a result of compressed demand for homes below the cap.
Inner-city units had a $599,000 median price a year ago, but that is now $609,500, while the outer-Melbourne apartment median has jumped $53,500 in the past year to reach $654,500.
Median priced houses have been beyond the reach of the $600,000 cap for a number of years in all but a handful of suburbs.
Even in regional Victoria the median priced house is now $672,000, up from $600,000 a year ago — making the cap a challenge beyond the big smoke as well.
REIV chief executive Toby Balazs said the caps were limiting buyer choice and likely increasing the home prices that fall below them as a result of compressed demand.
“If you look at price growth, what you would see is that it’s essentially outdated,” Mr Balazs said.
“We are asking for a significant review of the caps, and for them to be more in line with market prices for both apartments and houses.”
REIV chief executive Toby Balazs has called for a “significant review” of Victoria’s stamp duty concession scheme for first-home buyers.
Real Estate Buyers Agents Association of Australia Victorian representative Matthew Scafidi said there were clear signs the current cap was driving a “race to $600,000” where investors and other homebuyers consistently raised their offers past the figure for homes advertised from $550,000 and up.
Mr Scafidi said a new cap should be set at $1m, noting that most would not be able to buy at that level anyway — but that it would spread out the demand.
The buyer’s agent said he had recently bought for a first-home buyer at $795,000 who had been surprised at how much less competition there was just $45,000 above the top of the program’s caps.
“It is probably a bit antiquated, the hard ceiling they have there now, and they do need it to be reviewed,” he said.
“And on a regular basis. Otherwise it will all concentrate in one price point again.”
REBAA Victoria representative Matthew Scafidi says first-home buyers should be able to purchase homes up to $1m without stamp duty.
Mortgage Choice broker Christopher Laidley said many first-home buyers were setting a $600,000 cap on their plans as a result of the scheme and struggling to find a suitable home.
“Many of them could have paid more than $600,000 with a higher cap, but they all wanted to limit themselves to $600,000 and not pay stamp duty,” Mr Laidley said.
Half of the clients who approached his firm in the final six months of 2025 were first-home buyers, of them about 40 per cent had yet to buy — and Mr Laidley said some had given up.
Others had been encouraged to go slightly above the caps to avoid competition, but still hadn’t been able to find a home.
Mr Laidley said that for most first-home buyers, not paying stamp duty meant they quickly spent a lot of money on furniture and other household items — but would spend less when they were having to pay stamp duty as the tax would quickly chew through their savings.
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: Ageing Victorian Vietnam veterans get $320m housing lifeline
Victoria selling off social housing while its pipeline falls behind Queensland, NSW
Geelong’s El Jannah launch earns huge payday as Croatian buyer pounces
English (US) · 