The first home buyers' 5% deposit scheme has enabled the purchase of nearly 1,500 properties that were later converted into investments, according to new government data. This revelation challenges the scheme's core purpose of helping Australians own their first home, sparking debate over whether the policy is being exploited by wealthier buyers.
How the 5% Deposit Scheme Works
The federal government's First Home Guarantee allows eligible buyers to purchase a home with as little as 5% deposit, with the government acting as guarantor for the remaining 15%. This removes the need for lenders mortgage insurance (LMI), making home ownership more accessible for those struggling to save a large deposit.
However, the latest data reveals that 1,473 properties purchased under the scheme were later rented out or sold as investments, raising questions about whether the initiative is being used as intended. The scheme was designed to help first-time buyers, not investors, but loopholes may allow some to circumvent the rules.
Data Highlights: A Closer Look at the Numbers
| Metric | Number |
|---|---|
| Properties converted to investments | 1,473 |
| Total properties purchased under scheme | Approx. 100,000+ |
| Percentage converted | ~1.5% |
| Average deposit saved by buyers | 5% |
While the percentage may seem small, the absolute number is significant. Critics argue that even a small fraction undermines the scheme's integrity, as it diverts government support away from genuine first home buyers. The data also shows that some buyers may have used the scheme to enter the market with the intention of investing from the start, which is against the spirit of the policy.
Why Are Properties Being Converted?
There are several reasons why first home buyers might convert their property into an investment. Some may have purchased a home but later decided to rent it out due to job relocation or financial changes. Others may have used the scheme strategically, buying a property they always intended to rent out while continuing to live elsewhere.

The government has stated that it will review the rules to close any loopholes. However, experts suggest that the current system relies on self-reporting, making it difficult to enforce compliance. This has led to calls for stricter eligibility checks and ongoing monitoring of properties purchased under the scheme.
Impact on the Housing Market
The conversion of these properties into investments could exacerbate Australia's housing affordability crisis. By reducing the supply of owner-occupied homes and increasing the number of rental properties, it may push prices higher in some areas. This is particularly concerning in a market where home ownership rates among young Australians have been declining.
- Policy loophole: The scheme may be exploited by investors.
- Market distortion: Reduces available housing for first-time buyers.
- Government response: Promises to tighten rules and improve monitoring.
- Need for transparency: Calls for public reporting on scheme outcomes.
What This Means for First Home Buyers
For genuine first home buyers, this news is a double-edged sword. On one hand, it highlights potential flaws in the scheme that could lead to tighter eligibility criteria, making it harder for some to qualify. On the other hand, it underscores the importance of understanding the rules and ensuring compliance to avoid penalties.
If you're considering using the 5% deposit scheme, it's crucial to be aware of the obligations. The government requires that you live in the property for at least six months within the first year of purchase. Failing to do so could result in having to repay the guarantee or face other consequences.

Expert Opinions and Future Outlook
Housing policy experts have weighed in on the data, with some calling for a complete overhaul of the scheme. Others suggest that the issue is not the scheme itself but the lack of enforcement. The government has indicated that it will introduce new measures to prevent misuse, including more rigorous checks and possibly requiring buyers to sign a declaration that they intend to live in the property for a longer period.
In the meantime, the debate continues over how to balance support for first home buyers with the need to prevent exploitation. The data has also sparked a broader conversation about the role of government schemes in addressing housing affordability, with some arguing that more direct interventions, such as increasing social housing, are needed.
FAQ
What is the first home buyers' 5% deposit scheme?
The First Home Guarantee allows eligible first-time buyers to purchase a home with a 5% deposit, with the government guaranteeing up to 15% of the loan. This helps buyers avoid lenders mortgage insurance.
How many properties under the scheme became investments?
Nearly 1,500 properties purchased under the scheme were later converted into investments, according to government data. This represents about 1.5% of total purchases under the scheme.

What are the consequences for buyers who convert their home to an investment?
Buyers who do not meet the residency requirement may be required to repay the government guarantee or face other penalties. The government is also considering stricter enforcement measures.
Key Takeaways for Aspiring Homeowners
If you're planning to use the 5% deposit scheme, it's essential to do your research and understand the rules. The scheme can be a valuable tool for getting onto the property ladder, but it comes with responsibilities. Always ensure you intend to live in the property as your primary residence, and be prepared to provide evidence if required.
Stay informed about any changes to the scheme, as the government is likely to tighten regulations in response to this data. By being proactive and compliant, you can make the most of this opportunity without falling foul of the rules.
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