The type of property with fastest rising prices right now

The scheme, which allows first home buyers to purchase with a low 5 per cent deposit and avoid paying lenders’ mortgage insurance, expanded from October 1. There is now no limit on how many buyers can use it, nor how much they can earn before they qualify.

The price caps for eligible properties increased to $1.5 million in Sydney, $950,000 in Melbourne, $1 million in Brisbane and $850,000 in Perth.

Data revealed by Housing Minister Clare O’Neil showed there were 5778 guarantees under the 5 per cent deposit scheme issued last month, an increase of 1878 on the same month last year.

Of the 5778 guarantees granted, 2700 were newly eligible under the government’s expanded scheme. O'Neil last week said the increase in people using the deposit scheme was in line with estimates from the Treasury, which has said it would lift house prices by 0.6 per cent over 6 years.

“I think that’s the firmest evidence so far that it’s been popular with first home buyers,” Lawless said. “If I was a first home buyer and didn’t have a 20 per cent deposit, I’d be taking advantage of this policy as well.”

Lawless cautioned that the trend of rising lower-end property values had been happening for quite some time.

“There’s probably other things in the works here beyond just the first home buyer scheme,” he said.

“Probably the biggest factor here is going to be affordability and serviceability constraints in the market deflecting more demand toward the mid- to lower end of the marketplace, simple because that’s where people can demonstrate ability to service their loan.”

Borrowers paying an interest rate of 6 per cent were being assessed by banks to check if they could pay their mortgage at a 9 per cent rate, due to the serviceability buffer, he said.

He thought investors were also driving demand in the more affordable end of the market, seeing the opportunity for a pick-up in capital growth amid heightened competition.

In Melbourne, buyer’s agent Wendy Chamberlain has seen an uptick in enquiry from first home buyers, with budgets ranging from $500,000 to the cap of $950,000.

“That market is quite buoyant, but it depends on what because apartments are a dime a dozen... Parts of the market are patchy at the moment.

“There’s more buyers at auction and more bidders at auction than there were. The first home buyers are out there and they are definitely competing on the homes that they look at, so there’s more activity and more competition.”

In Sydney, Michelle May of the eponymous buyer’s agency has also seen an increase in enquiry, and said open for inspections have been busy.

She described auctions under the price cap as “very fierce”, with the bank of mum and dad heavily involved.

“We’ve seen that dad or mum goading their child, like ‘I’ll help you pay for it.’”