The federal government has announced an additional 10,000 First Home Loan Deposit Scheme places will be provided to support the purchase of a new home or a newly built home.

The scheme allows buyers to get into the property market with a deposit as low as five per cent.

Read more: How the pandemic helped make this Sydney couple's Wollongong dream a reality

They also avoid lenders' mortgage insurance, as the federal government acts as guarantor on the loans.

Matt Knight runs Illawarra/South Coast-based buyer's agency firm Precium.

"It will make a small difference, but 10,000 people in a national market is a drop in the ocean really," he said.

"Every bit of funding to a first home buyer helps them get into the market, and certainly helps them stimulate the building industry if it's targeted towards new builds.

"But it fundamentally increases demand, (and) doesn't actually change supply. We've still got supply issues (in the Illawarra)."

Mr Knight said there were also potential issues associated with the "red tape" to access the scheme.

"Some of the (government's) schemes have some very specific criteria as to who qualifies, and some specific dates in terms of when they need to get things done.

"And with property transactions, development applications and build contracts, it's difficult to get those dates to line up precisely with some of the grant criteria."

Price caps for the scheme will also be increased.

In NSW, the extended price caps will now be $950,000 (capital city/regional centre, including the Illawarra - previous limit was $700,000) and $600,000 (rest of the state).

Under the previous caps announced last year, buyers were not restricted to new builds.

The new places will be open from October 6 until June 30 next year.

Treasurer Josh Frydenberg said the loan deposits could be used in conjunction with HomeBuilder, which provides grants of $25,000 for new homes and major renovations.

Housing Minister Michael Sukkar said the additional grants will also support the jobs of Australia's tradies.

Matt Hutchinson from First National Shellharbour said they'd had a few buyers who had accessed the scheme earlier this year.

"And I think with the recent new build grant (with HomeBuilder), there's been a lot of people sign up to that," he said.

"A lot of the builders have sold in bulk.

"So for new builds in particular, what I've been finding is a number of people won't be able to take advantage of the scheme, because they're not going to have their slabs down in time.

"It's about supply and demand. Even with the government guarantor, even if they've got the ability to get into the market, they may not be able to take advantage of the scheme within the timeframe for a new build."

All applications for the First Home Loan Deposit Scheme need to be made directly with one of the scheme's participating lenders.

The First Home Loan Deposit Scheme opened in January, offering 10,000 places for the 2019-20 financial year.

Another 10,000 places were opened on July 1 for this financial year.

We depend on subscription revenue to support our journalism. If you are able, please subscribe here. If you are already a subscriber, thank you for your support.