Federal Budget May 12: a buyer's guide before Tuesday

The federal budget lands on Tuesday, May 12 - two days away. Housing is expected to be one of the centrepieces of this year's spending plan, with the government under significant pressure to demonstrate action on affordability as interest rates climb and more buyers are priced out of capital city markets. For first home buyers, three headline measures could directly affect your path to ownership: expanding the schemes available to you, reshaping investor activity in the price ranges where you are competing, or adding new buyer-specific housing stock. Here is what the pre-budget reporting tells us, and how to prepare before Tuesday.

What housing experts expect on May 12

Several measures are widely anticipated based on Labor's pre-election commitments and commentary from housing and finance analysts:

• CGT and negative gearing reform. Treasury is reportedly modelling two changes: limiting negative gearing to two investment properties per person (losses on a third or subsequent property quarantined to future rental income), and reducing the CGT discount from 50 per cent to 33 per cent for residential investment properties. Neither is confirmed, but reporting is coming from multiple credible sources including CBA, API Magazine, and Andersen Australia. Industry bodies and economists hold different views on the likely effect - some argue fewer investors competing in the sub-$1 million segment could reduce price pressure for first home buyers, others warn of tighter rental supply. A tax accountant or financial adviser can help you model confirmed changes once the budget lands.
• Help to Buy expansion. The shared equity scheme - which launched in December 2025 and has already helped 278 households into their own homes - is expected to receive approximately $800 million to raise both property price caps and income thresholds. Currently income caps sit at $100,000 for individuals and $160,000 for couples. If confirmed changes raise those thresholds, buyers sitting just above the current limits may find they qualify once legislation passes. The lender panel is also expected to expand beyond the current two participants (Commonwealth Bank and Bank Australia), giving buyers more product choices and broker access.
• 100,000 homes for first home buyers. Labor committed to building 100,000 new homes for first home buyers, with construction expected to begin between 2026 and 2027. The budget is expected to include delivery details: site selections, state and territory agreements, and pricing targets.
• Housing Australia Future Fund additions. The $10 billion fund financing social and affordable housing construction is expected to receive additional allocation or reform. National housing approvals are running well below the 1.2 million home target under the National Housing Accord, and supply-side investment is expected to feature prominently.
• Planning reform incentives. Federal funding tied to state and territory governments approving more housing developments has been flagged by industry bodies and economists. Supply constraints are broadly viewed as a bigger driver of affordability pressure than demand-side factors.

The rate backdrop buyers cannot ignore

Any budget measures for first home buyers play out against a difficult lending environment. The RBA raised the cash rate on May 5, bringing it to 4.35 per cent. Rate increases affect how much you can borrow - a shift of 0.25 percentage points reduces maximum borrowing capacity by approximately 2 per cent for most borrowers. If further hikes follow later in 2026, the cash rate could reach 4.85 per cent by year end, reducing what a typical buyer can borrow by a meaningful amount from today's figure.

Before making any offer, it is worth modelling what your repayments look like at current and higher rate scenarios. Use the Interest Rate Shock Tester to see how different rate scenarios affect your monthly repayments and where your budget holds up.

What you can access right now, before May 12

The budget is two days away, but two major federal schemes are open today with no waitlist:

• Australian Government 5% Deposit Scheme. Since October 2025, this scheme has no income cap, no annual place limit, and no lenders mortgage insurance requirement. Buy with a 5 per cent deposit and the government guarantees the remaining 15 per cent so you avoid LMI - a saving that can amount to tens of thousands of dollars upfront. Property price caps apply by location and have been raised substantially: Sydney's cap is now $1,500,000. Single parents can buy with just 2 per cent. The LMI Calculator shows exactly how much mortgage insurance you would save by qualifying.
• Help to Buy. The government co-purchases up to 40 per cent of a new home (or 30 per cent of an existing home), meaning you borrow less and pay lower monthly repayments. Currently only CBA and Bank Australia participate, but the scheme is open and taking applications. The Scheme Comparison Tool can show how Help to Buy stacks up against other schemes based on your income, deposit, and location.

In Queensland, a separate and more urgent deadline applies. The $30,000 First Home Owner Grant drops to $15,000 from July 1, 2026. Contracts for new homes signed before June 30 still qualify for the higher amount alongside zero stamp duty for eligible buyers. That is a concrete 51-day window that runs independently of the federal budget. Use the Grant Stacker to see which combination of federal and state support applies to your situation.

What this means for first home buyers

The budget creates a genuine decision point. How you respond depends on where you are in your buying timeline:

• If you are ready to buy now, the schemes available today may be sufficient. Waiting risks losing ground if your borrowing capacity falls further before you secure a property. Review your current Help to Buy eligibility - if you sit just above the income threshold, the expected expansion could open the door, but waiting for legislation to pass takes time.
• If you are 6 to 12 months away, watching the May 12 announcement makes sense. An expanded Help to Buy lender panel, updated income thresholds, or new buyer-specific housing stock could materially change your options.
• If you are in Queensland, the July 1 FHOG deadline is a harder constraint than the federal budget. A $15,000 grant reduction is a concrete cost. Budget uncertainty should not delay a decision if you are eligible and ready to proceed.
• For all buyers, stress-testing your borrowing capacity at 4.35 per cent and higher now tells you whether your plan holds up regardless of what the budget delivers.

Speak with a mortgage broker or financial adviser before acting on budget speculation. Any confirmed changes will take time to legislate and implement. Decisions about when and what to buy should be grounded in your personal financial position, not what is reported before the budget is handed down.

Run the numbers

With the budget two days away, now is the right time to understand where you stand:

• Scheme Comparison Tool - compare Help to Buy, the 5% Deposit Scheme, and state-based grants side by side based on your income, deposit, and location
• Borrowing Power Calculator - model your maximum borrowing capacity at the current 4.35 per cent cash rate and higher scenarios
• Interest Rate Shock Tester - see exactly how much more you would pay each month if rates rise further from today's level
• Grant Stacker - stack all grants and concessions available to you by state, property type, and purchase price to see your total potential support
• LMI Calculator - calculate the lenders mortgage insurance you would save by qualifying for the 5% Deposit Scheme or Help to Buy
• Stamp Duty Calculator - confirm your upfront costs and first home buyer concessions before finalising your budget