The first home buyers' 5% deposit scheme has a surprising twist: nearly 1,500 properties bought under this government initiative were converted into investments. This revelation challenges the program's core goal of helping Australians own a home, sparking debate about housing policy effectiveness.
How the 5% Deposit Scheme Works
The scheme allows eligible first home buyers to purchase a property with just a 5% deposit, with the government guaranteeing the remaining 15% to avoid lenders mortgage insurance. It's designed to fast-track homeownership for those struggling to save a larger deposit.
However, new data shows that a significant number of these properties are now being used as investments, not primary residences. This raises questions about whether the scheme is being exploited by wealthier buyers or those with alternative intentions.
Key Findings from the Data
The report reveals that 1,482 properties purchased through the scheme have been converted into rental properties or investment assets. This represents a small but notable fraction of the total scheme usage, yet it highlights a loophole in the system.
| Metric | Number | Percentage |
|---|---|---|
| Total properties under scheme | ~150,000 | 100% |
| Converted to investments | 1,482 | ~1% |
| Owner-occupied | ~148,518 | ~99% |
Why This Matters for First Home Buyers
For genuine first home buyers, this twist could mean reduced availability of affordable housing, as some properties are taken off the owner-occupier market. It also undermines public trust in the scheme's fairness, especially when housing affordability is a pressing national issue.

The government has stated it will review the rules to prevent further misuse, but critics argue that stronger enforcement and eligibility checks are needed. The opposition has called for a tightening of the scheme to ensure it benefits those who truly need it.
Potential Reforms and What's Next
Possible changes include requiring buyers to live in the property for a minimum period, or imposing penalties for early conversion to investment. Some experts suggest limiting the scheme to new builds or lower-priced properties to reduce speculative activity.
- Minimum occupancy period: Require owners to live in the home for at least 2-5 years.
- Income caps: Restrict eligibility to those below a certain income threshold.
- Property price limits: Apply the scheme only to homes under a set value.
- Enhanced compliance: Increase audits and penalties for misuse.
Impact on the Housing Market
The conversion of these properties into investments could tighten rental supply, but it also adds to the investment property pool. For first home buyers, the competition remains fierce, and this news may further discourage those considering the scheme.
Real estate analysts note that while 1% is small, the symbolic impact is significant. It shows that even well-intentioned policies can be gamed, and it calls for more robust oversight.

What Should First Home Buyers Do?
If you're planning to use the 5% deposit scheme, ensure you understand the rules and your obligations. Keep documentation of your intent to live in the property, and be aware of any changes to the program that might affect you.
Consult with a financial advisor or mortgage broker to clarify your position. Stay updated on government announcements, as reforms may be introduced soon.
Conclusion
The first home buyers' scheme twist is a wake-up call for policymakers and buyers alike. While the majority of participants use the scheme correctly, the loophole must be closed to maintain fairness. For now, genuine first home buyers should proceed with caution and stay informed.
FAQ
What is the first home buyers' 5% deposit scheme?
How many properties have been converted to investments?
What changes are being considered to fix the loophole?
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