The Victorian government has announced it will extend the First Home Bonus (FHB) for an additional 12 months to cope with soaring demand for property.

Buyers looking to purchase new developments will benefit most from the recent state budget, announced by Treasurer John Lenders. Those buying newly constructed properties in regional areas gain an extra $4,000, bringing their total entitlement up to $26,000. An extra $2,000 is available for those buying new developments in metropolitan Melbourne, with up to $20,000 now available. First homebuyers purchasing existing properties are still eligible for the $7,000 FHOG under the federal scheme.

The news was a welcome change for first homebuyers who are feeling the pinch of yet another interest rate rise. The lift, combined with property prices soaring by 28% over the past 12 months, has threatened to push first homebuyers out of the market.

According to REIV CEO Enzo Raimondo, the extension of the FHB will help thousands of young people move into successful home ownership. "The fact that first homebuyers of a new home will now receive $20,000 in Melbourne and $26,500 in regional Victoria will help thousands of young people exit the tight rental market and buy their first home," he said.

However, Raimondo said he finds it disappointing that buyers of existing homes will see their level of assistance slashed. "It appears that the removal of the $2,000 FHB for existing homes pays for the $2,000 increase for new homes," said Raimondo. "This measure will make it harder for 70% of first homebuyers and easier for 30%," he said. As Victoria struggles with a shortfall of approximately 22,000 homes, it is anticipated that the FHB will help increase supply.