First home buyers of properties worth up to $750,000 will be able to pay stamp duty in monthly instalments over a five-year period if Labor wins the state election.
The option to defer stamp duty would be open to more than 37,000 first home buyers each year.
"Property across greater Sydney will continue to be in high demand. Labor will act to help hard-working people achieve their dream of home ownership," Opposition Leader Luke Foley said in a statement on Monday.
Premier Mike Baird dismissed the idea as a "thought bubble" from "Labor of old".
"You can't believe anything that they say," he told reporters in western Sydney.
"It's not something that should be taken seriously."
Mr Foley, who is launching his Central Coast campaign in Gosford, accused the government of stripping stamp duty exemptions and first home buyer grants, leaving first home buyers up to $25,000 worse off.
This translates to a 33 per cent slump in the number of first home buyers gaining finance since 2011, he said.
"Mike Baird and the Liberals have crushed the dreams of first home buyers," he said.
"With no incentive or support, individuals and young couples working hard in Sydney just can't get into the property market and buy their first home."
Mr Baird said there would be a "huge cost" to the state budget under Labor's plan.
That would mean cutting other services and infrastructure.
"Until they tell you how they're going to pay for anything, any proposal put forward has no credibility," the premier said.
He said the government already offered stamp duty concessions to first home buyers who purchase new dwellings and he'd look at other "sensible" ideas to make it easier for people to enter the property market.
Mr Foley said Labor's plan would cost $60 million and had been fully costed by the Parliamentary Budget Office.
If Labor wins the March 28 election, it will come into effect on January 1, 2016.
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