Victoria has launched a $500 million fund to get home buyers into the market amid signs that more young buyers are purchasing inner-city properties.
The Victorian Treasurer Tim Pallas says the Victorian Homebuyers Fund is expected to help about 3,000 residents buy a home.
The fund is an expansion of the $50 million HomesVic Shared Equity Initiative, which the government says has helped more than 330 households into the market.
Most recipients of the Victorian Homebuyers Fund or VHF will need to have a 5 per cent deposit, with the government providing up to 25 per cent on top of that.
The government will keep that stake in the home until the property is sold or the owner buys out its share.
Under the plan, participants do not need to be first home buyers, but they cannot currently own a property.
"They'll be able to buy homes with the help of the Victorian government, which will be an equity partner in the purchase," Mr Pallas says.
The boost for younger buyers comes as Melbourne experiences a widening gap between the cost of houses and the price of apartments.
In fact, inner-city apartments represent some of the best buying value in the city at present.
Data analyst groups such as CoreLogic and Domain have tracked surging rates of house price growth over the past 18 months. But it has been a different story for apartments, which have been hit by various headwinds.
These include a drop-off in rental demand from overseas students, added supply from new apartment blocks and AirB&B-type short-term accommodation providers trying to sell apartments.
These factors are contributing to vendors offering some of the most competitive asking prices for inner-city apartments seen in Melbourne for 15 years.
New research from one of Australia's biggest lenders shows that buyers in their 20s and 30s are taking advantage of the supply-demand imbalance and pushing their way back into inner-Melbourne postcodes.
National Australia Bank figures show loans to first-time purchasers in Preston jumped 252 per cent in the four months to August, with Balaclava not far behind at 230 per cent.
NAB executive of homeownership Andy Kerr says Melbourne trailed all other cities in first-home buyer activity in 2020, primarily due to the impact of Covid-19. Still, the Victorian capital is now seeing "an element of catch-up" among young buyers.
"Confidence in the housing market continues to improve despite the ongoing impact of the pandemic, and that shows in the amount of activity we are seeing through mortgage applications," Mr Kerr says.
"There is consistent demand from customers in conversations to buy a home."
Under the VHF program, homes in Melbourne and Geelong need to cost $950,000 or less, with the cap in the rest of the state at $600,000.
Recipients of the funding can either buy out the state's share in the home or give the same proportion of the value back to the VHF when they sell.
"We will put that money back into the fund, so this will become self-sustaining in all likelihood, given the continuing and historical appreciation and value of assets over time," Mr Pallas says.
"We're not putting more money into people's pockets … we're giving them the opportunity to participate in a competitive market."
Mr Kerr says the NAB is focused on making 60-minute unconditional loan approvals the norm.
"We understand there are headwinds in slower population growth and the impact of rising house prices," he says.
"However, we expect low rates and government programs like the First Home Loan Deposit Scheme to continue to drive a strong housing market."