The property market will receive extra support from January 1, regardless of what the Reserve Bank will do in early December. The First Home Loan Deposit Scheme (FHLDS) starts in the new year and there are flow-on advantages, challenges and opportunities, although it does not directly affect investors.

The scheme, close to completion, is expected to allow 10,000 first home buyers to secure property every financial year with as little as 5 percent deposit without paying lender’s mortgage insurance (LMI) to borrowers. Lenders usually require borrowers to take out a policy if the deposit is less than 20%, with LMI often adding an extra $10,000 or so to the cost for the first home buyer.

But in the past 12 months, according to the Australian Bureau of Statistics, there have been almost 110,000 first home buyers, so the program will account for only a fraction of potential applicants. And with the allocation being given on a first-in, first-served basis by the federal government advising, there may be an unseemly scramble in January and February to secure these places.

There are price limits that will vary across cities and states, indicating relatively insufficient regional affordability. So the ceiling is $700,000 in Melbourne, the most expensive, while Adelaide’s scheme-guaranteed sales must fall at only $250,000.

Beyond the first buyers, the most likely to be affected are prospective investors with budgets below the FHLDS caps. They will compete against first home buyers who are motivated to reach a deal to get an allocation from FHLDS. The caps are set fairly low to limit the generosity of the taxpayer. Thus, in most suburbs, the battlefield in our major cities will continue to be one-and two-bedroom apartments, and some starter houses in the outer suburbs, as well as the urban fringe.