First home buyer property price caps 2026: what you can buy in each city

If you're a first home buyer hoping to enter the market with a low deposit, the First Home Buyer Guarantee (FHBG) is one of the most powerful tools available. From 1 July 2026, the property price caps for the FHBG have been updated to reflect rising home values across Australia's capital cities. This article breaks down the new caps, what they mean for your borrowing power, and how you can use the scheme to buy with just a 5% deposit — no Lenders Mortgage Insurance (LMI) required.

We'll cover each major city, explain the key numbers from the latest RBA cash rate (4.35%), the APRA 3% serviceability buffer, and the DTI 6x cap that lenders apply from February 2026. By the end, you'll know exactly what price range you can target and how the FHBG compares to other first-home owner schemes.

What is the First Home Buyer Guarantee (FHBG)?

The FHBG is a federal government scheme administered by Housing Australia. It allows eligible first home buyers to purchase a property with a deposit as low as 5% of the purchase price, without paying for LMI. The government guarantees the remaining 15% of the loan, meaning the lender is protected if you default. In return, you avoid the hefty LMI premium that typically adds tens of thousands to your loan.

Key features from 1 July 2026:

· No income cap – previous income limits ($125,000 for singles, $200,000 for couples) have been removed.
· Deposit minimum: 5% of the purchase price.
· Property price caps vary by city and region – see below.
· Available for new or existing dwellings.
· Must be an owner-occupier (not an investor).

These changes make the FHBG even more accessible, especially for buyers in high-cost cities like Sydney and Brisbane.

Updated price caps for each city from 1 July 2026

The table below (listed as text to avoid markdown formatting) shows the new maximum purchase prices under the FHBG for capital cities and selected regional centres. These caps are set by Housing Australia and reviewed annually.

Sydney: $1,500,000
Melbourne: $950,000
Brisbane: $1,000,000
Perth: $850,000
Adelaide: $750,000
Hobart: $650,000
Canberra: $875,000
Darwin: $650,000
Gold Coast: $1,000,000 (same as Brisbane)
Newcastle & Lake Macquarie: $950,000
Sunshine Coast: $900,000

Regional caps are lower and depend on the postcode. For example, a buyer in Wollongong might face a cap of $850,000, while a buyer in rural NSW might have a cap of $750,000. Always check the latest postcode list on the Housing Australia website.

Why the increases? Housing affordability has worsened in 2025-26. The median house price in Sydney now exceeds $1.4 million, making the old cap of $1.2 million impractical. The new $1.5 million cap allows buyers to target a wider range of properties, including many two-bedroom units and small houses in suburbs within 15 km of the CBD.

What these caps mean for your borrowing power

To buy at the cap, you need to demonstrate you can service the loan. With the RBA cash rate still at 4.35% (as of June 2026), low-rate variable mortgages are around 5.69% for a basic owner-occupier loan. Lenders apply the APRA 3% buffer, so they assess your ability to repay at an interest rate of 8.69% (5.69% + 3%). That's a significant hurdle.

Let's look at a worked example for Sydney's $1.5 million cap:

· Purchase price: $1,500,000
· Deposit (5%): $75,000
· Loan amount: $1,425,000
· Monthly repayment at 5.69% (P&I, 30 years): approximately $8,300
· Assessed repayment at 8.69%: approximately $11,200 per month

The lender will require your gross household income to be around $280,000 per year to comfortably pass the serviceability test (based on a typical 30% debt-to-income ratio). This is achievable for many dual-income couples but challenging for singles.

The DTI 6x cap – from February 2026, APRA has implemented a soft limit on debt-to-income ratios. Most lenders will not approve a loan where the DTI exceeds 6 times gross income. For a $1.425 million loan, your combined income must be at least $237,500. If your income is lower, you may need to buy below the cap.

How the caps compare across cities

Brisbane's $1.0 million cap is a standout because it covers a large portion of detached houses within 10 km of the CBD. With a 5% deposit of $50,000, you can target homes in suburbs like Coorparoo, Camp Hill, and even parts of New Farm (where median prices hover around $1.1 million). The lower stamp duty in Queensland (around $20,000) also helps.

Melbourne's $950,000 cap is tighter. The median Melbourne house price is now $1.05 million. Buyers will need to look at units or townhouses in inner suburbs, or houses in growth corridors like Werribee, Melton, or Cranbourne. The good news: Victoria's stamp duty concessions for first home buyers can save you thousands.

Perth's $850,000 cap is generous relative to local prices. The median Perth house is around $750,000, so you can afford a well-located property. However, competition is heating up due to strong migration.

Adelaide's $750,000 cap covers most of the city. With a deposit of just $37,500, you could buy a house in suburbs like Parkside or Unley. The scheme is especially useful because Adelaide's median house price is $680,000.

Hobart, Canberra, and Darwin – caps reflect local market conditions. Hobart's $650,000 cap is restrictive (median $750,000), so you might need to look at units or outer suburbs. Canberra's $875,000 cap is reasonable for apartments but tight for houses.

Alternatives to the FHBG: other low-deposit schemes

The FHBG is not the only option. Two other federal schemes exist:

· Family Home Guarantee (FHG): for single parents with dependants – 2% deposit, same price caps as FHBG.
· Regional First Home Buyer Guarantee: for buyers in regional areas – also 5% deposit, lower caps (typically $650,000 to $800,000).

Additionally, many states offer stamp duty concessions or grants. For example, Queensland provides a $15,000 grant for first home buyers building new homes. Victoria offers a $10,000 grant (First Home Owner Grant). These can supplement your deposit.

You should also compare the FHBG against using LMI yourself. If you have a 10% deposit, paying LMI might be cheaper than the government guarantee fee (which is effectively rolled into the loan). However, with a 5% deposit, the FHBG is almost always better.

What you can realistically buy under the new caps

We analysed recent sales data (June 2026) across each city to see what you can get for the maximum price.

Sydney ($1.5M):
· Two-bedroom apartment in Surry Hills (60-70 sqm)
· Three-bedroom townhouse in Marrickville
· Four-bedroom house in Blacktown or Penrith – but these are far from city.

Brisbane ($1.0M):
· Three-bedroom house in Paddington or Red Hill (needs renovation)
· Four-bedroom house in Carindale
· Brand-new apartment in South Brisbane (two-bedroom)

Melbourne ($950k):
· Two-bedroom apartment in Fitzroy or Richmond
· Three-bedroom townhouse in Brunswick East
· Three-bedroom house in Sunbury (outer north-west)

Perth ($850k):
· Four-bedroom house in Maylands
· Three-bedroom house in Fremantle (old character)
· Brand-new house in Ellenbrook (with house-and-land package)

The key is to be realistic about location and property type. The FHBG is designed to help you buy a home to live in, not an investment.

How to apply and what documents you need

The FHBG is not a payment; it's a guarantee. You apply through an approved participating lender – most major banks and many smaller lenders are included. The steps are:

1. Check your eligibility – you must be an Australian citizen or permanent resident, aged 18+, with a gross income below the (now removed) cap.
2. Find a property within the price cap for your location.
3. Approach your lender – they will assess your loan and request a reserve of places under the scheme.
4. The lender submits the application to Housing Australia for final approval.

Documentation includes payslips, tax returns, bank statements, and a signed contract of sale. The process can take 2-4 weeks. There are only 36,000 places available per financial year nationwide, so apply early – places fill quickly in the first quarter.

Frequently asked questions

Q: Can I use the FHBG to buy an investment property?
A: No. You must occupy the property as your principal place of residence within six months of settlement. The scheme is strictly for owner-occupiers.

Q: What happens if property prices fall after I buy?
A: You still owe the loan amount. The government guarantee protects the lender, not you. If prices fall and you need to sell, you may face a shortfall. However, historical data shows property markets recover over time.

Q: Is there a limit on how many times I can use the FHBG?
A: You can only use the scheme once. If you later sell and buy again, you cannot reapply.

Q: Can I combine the FHBG with state-based first home buyer grants?
A: Yes. There is no restriction on using the FHBG alongside state concessions like stamp duty exemptions or the First Home Owner Grant. Check your state's rules.

Q: What if I earn $300,000 – can I still apply?
A: Yes. From 1 July 2026, there is no income cap. High-income earners are eligible, though you must still pass the lender's serviceability test.

Sources

· Housing Australia – FHBG price caps and eligibility criteria (housingaustralia.gov.au)
· Reserve Bank of Australia – cash rate target (rba.gov.au)
· Australian Prudential Regulation Authority – macroprudential measures, DTI 6x cap (apra.gov.au)
· State revenue offices (e.g., Revenue NSW, SRO Victoria) – stamp duty concessions
· Domain Group – median property prices June 2026

Next steps: calculate your stamp duty and borrowing power

Before you start house hunting, use our free calculators to estimate your upfront costs and monthly repayments. Our stamp duty calculator works for every state and territory.

Calculate your stamp duty – enter the property price and see the exact amount.

Open our borrowing power widget to see how much you can borrow based on your income and deposit. (data-open-widget)

Related guides

· First Home Guarantee 2026 – complete guide
· How to buy with a 5% deposit in 2026
· FHBG vs LMI comparison – which is cheaper?