Why Victoria is the state of choice for first-home buyers

Australian Bureau of Statistics (ABS) data shows first-home buyers are securing more home loans in Victoria than in any other state or territory.

The number of new market entrants in the state was up 13.9% for the July quarter compared to the same period last year, while a total of 39,336 market entrants secured a mortgage in Victoria between July 2023 and July 2024 – the highest number recorded since the year to December 2022.

The high levels of interest in the state is unsurprising, with the 2023-24 Australian Home Guarantee Scheme Trends and Insights Report showing price growth increased by just 1% last financial year, compared with the national average of around 7%.

A grants haven

Steady prices across the state are providing much-needed confidence for first-home buyers despite high costs, with many also taking advantage of Home Guarantee Schemes.

Usage of schemes was up across Victoria for 2023-24, with take-up 57% higher than the year before which saw 6,300 guarantees.

Over a quarter (28%) of first-home buyers in Australia who used the schemes in the last year have come from Victoria alone, the ABS data shows.

First-home buyers have been flocking to Melbourne. Picture: Getty

The First Home Guarantee – which lets eligible property seekers buy a home with a deposit as low as 5% without Lenders’ Mortgage Insurance – was used by 4,089 home buyers in Greater Melbourne over the past 12 months and a further 846 in the rest of Victoria.

Another 129 people in Greater Melbourne and 80 across the rest of the state bought a house using the Family Home Guarantee, the scheme designed to support single parents or single legal guardians of a dependent to get on the property ladder.

A total of 860 guarantees were also handed out over 2023-24 to first-home buyers across Victoria (excluding Greater Melbourne) under the Regional First Home Buyer Guarantee.

Melbourne on the way up

How might the influx of first-home buyers impact market prices moving forward, however? More affordable Melbourne properties still represent 90% of all Home Guarantee Schemes purchases in the state, at a total 7527 in the last year.

The most popular suburbs using the schemes were those with a 3064 postcode in Melbourne’s north including Craigieburn, Donnybrook, Kalkallo, Michelham and Roxburgh Park. This was followed by the 3029 postcode which covers Hoppers Crossing, Tarneit and Truganina in the western suburbs.

The median purchase price of a home in Melbourne is currently sitting at $620,000, PropTrack data shows, while the median price across the rest of Victoria sits at $535,000.

PropTrack senior economist Eleanor Creagh said there was currently more choice for Victorian homebuyers.

PropTrack senior economist Eleanor Creagh says subdued conditions in Melbourne compared to other capitals has likely supported the high level of first-home buyer activity seen more broadly across the state.

“Buyers in Melbourne and regional Victoria have also experienced a large uplift in choice given the accumulation of total stock on market,” she added.

Despite availability, conditions in both Melbourne and regional areas have been sluggish. Melbourne home prices fell 0.18% in August, marking the fifth straight month of declines with prices now down 1.98% in that period, PropTrack findings show.

Ms Creagh said buyers in Melbourne are still holding the upper hand as spring kicks off however – news that is also positive for pricing across the rest of the state.

“Throughout the balance of the year, income growth following the implementation of the Stage 3 tax cuts and further declines in inflation will likely support continued activity, alongside the continued uplift in new properties hitting the market through the spring selling season,” she said.

“The continued increase in new properties hitting the market in Melbourne has given buyers more choice than has been the case since 2018, likely creating opportunities for first-time buyers.”

Nine of Melbourne’s best new off-the-plan apartment developments

High availability of new off-the-plan apartment developments are also bolstering opportunities to get on the property ladder in the state’s capital.

Melbourne home prices fell 0.18% in August. Picture:Getty

A new family-focused development in the inner Melbourne suburbs of Hawthorn was opened last week, delivering more than 200 new homes aimed at families and young people and including a 98% increase in social homes on the site.

New developments in Yarraville, South Yarra, Richmond, Kew, Elsternwick, St Kilda, and Prahran are also in the works.

Ms Creagh said total listings were at levels seen in 2018 and well above the prior five-year average.

Melbourne-based Mortgage Choice broker David Thurmond said the surge in first-home buyer success in Victoria is also being driven by a home financing bottleneck for those already on the property ladder.

“There is going to be a period of drought for two or three years because everyone has sped up the cycle while the rates were low,” he explained.

“Now that rates are higher and borrowing capacity is so difficult, no one is upgrading their home because they can’t afford to and that is why I think we are seeing that the majority of people purchasing are first-home buyers.”

Going solar?

In a good boost for the regions, the $651 million Hazelwood North Solar Farm has also been given the greenlight from the government – a 450-megawatt capacity venture set to power approximately 150,000 homes across the state.

The farm’s headquarters in the La Trobe Valley - around 180km east of Melbourne - is set to make waves.

Victoria’s largest solar farm will 150,000 homes. Picture:Getty

“This valuable project will boost cheap energy, and support jobs and economic growth for communities across the region,” Member for Eastern Victoria Harriet Shing said.

Victorian planning minister Sonya Kilkenny said the project will deliver 500 new jobs in the area in a record 59,000 new jobs in renewable energy.

The farm is estimated to bring $9.5 million in economic development to the area – a welcome boost that could lure even more buyers into the regions and further ease competition in the Melbourne market.

“The property market in Victoria has gone sideways for the last two years,” Mr Thurmond said.

“Once we start to see rates dropped by the Reserve Bank, Victoria will take off like a rocket ship.