First home buyers are helping prop up the property market during a pandemic — but a feedback loop is emerging where rising prices are simultaneously making it harder than ever for some to buy their first home.

Despite initial predictions that property prices would dive, the exact opposite is happening one year on from the emergence of COVID-19.

Analysts say this is happening due to a combination of record-low mortgage rates, a strong economic recovery, and buyer demand being strong against relatively low levels of stock.

Even sharp drops in inner-city high-rise apartments in Sydney and Melbourne appear to have stabilised.

Melbourne woman Alycia Gawthorne has been saving to buy a property since she got her first job at 15 years of age.

"I'm a bit of an anomaly," she said.

Almost two decades after she started saving, Ms Gawthorne has a sizeable deposit and pre-approval for her first mortgage.

But she is not finding that to be an advantage to her, as a single-income first home buyer trying to snag an apartment in Melbourne's inner-north.

"When COVID started last year there was lots of speculation that prices would go down," she said.

"But it just hasn't turned out like that when I'm out inspecting homes."

CoreLogic data shows the price of apartments in the inner suburb Preston — one of the areas where Ms Gawthorne has been looking — has risen 2.5 per cent in the last year.

Ms Gawthorne is looking at apartments priced at less than $600,000 so she can take advantage of Victoria's first home buyer stamp duty waiver. But even that isn't giving her a leading edge.

"Even with my deposit, it doesn't make it much easier," she said.

As well as being a prospective first home buyer, she also works at a community legal centre that advises people with debt issues, and she does not want to end up in that situation herself.

First home buyers securing loans at record levels

While some like Ms Gawthorne are feeling deflated about ever owning their own home, others are entering the market at record levels during COVID-19.

Australian Bureau of Statistics data shows first home buyers are taking out mortgages at the highest rate since 2009.

Similar to now, that post-GFC era was also when a wave of economic incentives and low interest rates were encouraging Australians to buy their first home.

Scott Ryan bought his first house in Hoppers Crossing in Melbourne's outer west on the weekend.

"It's so exciting," he said.

Buying at auction, he paid $17,000 more for the two-bedroom home than its advertised sale range. CoreLogic data shows house prices in Hoppers Crossing have also risen 1.6 per cent in the last 12 months.

"During [Melbourne's lockdown], I thought I'd be able to snag a bargain," Mr Ryan said.

"I saw some prices dropped a little at times but nothing massive. Everybody is trying to find a steal but in the end you just have to pay what the market wants."

While Mr Ryan had been saving to buy for several years, he said historically low interest rates and Victoria's stamp duty concessions for first home buyers did help his enthusiasm.

The Reserve Bank of Australia says an interest rates rise is likely three years away, but as Australia fares better during the pandemic than previously expected, financial markets are currently betting that a rates rise could come a bit sooner.

"Obviously, if the rates do increase, I'll have to save more. But I am prepared. I'm disciplined," Mr Scott said.

Federal schemes encouraging young Australians

Some first home buyers are also taking advantage of the federal government's First Home Loan Deposit Scheme (FHLDS) that waives pricey insurance on loans for first home buyers that do not have a 20 per cent deposit.

Places in that scheme for existing home purchases have been especially popular and there are now waitlists at some banks to get on it.

"The scheme is cutting years off the time it takes Australians to save for a deposit, and it is working, with first home buyers now entering the market at the highest level since October, 2009," Minister for Housing Treasurer, Michael Sukkar, said.

The federal government also brought in the HomeBuilder scheme during the pandemic to help keep the construction industry stay afloat.

The latest ABS home loan data shows there have been record rises in the value of construction loan commitments since HomeBuilder was brought in.

Damien McCartney and his partner are building their first home in a brand new residential suburb on Sydney's fringe with help from that $25,000 grant.

"That pushed us towards building rather than buying established," he said.

"We looked at going into inner-west Sydney but it just made more sense with the price that we'd pay, eventually it was going to be quite similar to if we were building [out further]," he said.

"The rates may have increased our speed a little bit."

Mr McCartney said they couple may have had also sped up their housing plans because their ability to spend cash on travel had been soured by the pandemic.

"We wanted to travel as most young couples wanted to, but it didn't make sense with the uncertainty. We had the money there and it made sense to build sooner."

Despite his excitement, Mr McCartney said he felt sympathetic for those trying to enter the property market on lower budgets.

"I have no idea how anybody without two incomes could get into the market in Sydney," he said.

"Without getting assistance from family, I have no idea."

Will first home buyer demand continue?

CoreLogic analyst Eliza Owen said that is unlikely.

"I think that property prices are reacting to a strong level of domestic demand, a strong level of demographic demand, just in terms of the amount of people at that first and second home buyer age," she said.

"It's important to keep in the mind that when we see rising home prices, this means rising levels of debt. Eventually interest rates will go up."

University of Sydney housing policy analyst Nicole Gurran said that Australia had missed an opportunity during the pandemic to make housing more affordable for first home buyers and long-term renters.

"First home buyers are moving into the market and of course that's welcome, but they're taking on much higher mortgages.

"We've got a two speed system where wealthier and existing homeowners are benefiting from rising property prices but lower income earners are falling further behind than ever.