The first home buyers' 5% deposit scheme has enabled nearly 1,500 properties to be converted into investments, according to new data. This revelation raises critical questions about the scheme's effectiveness in helping Australians achieve homeownership. In this article, we dig into the numbers, the government's response, and what it means for future buyers.
Understanding the First Home Buyers' 5% Deposit Scheme
The scheme, officially known as the First Home Loan Deposit Scheme, allows eligible buyers to purchase a home with just a 5% deposit, with the government guaranteeing the remaining 15% to avoid lenders mortgage insurance. It was designed to reduce the barrier to entry for first-time buyers facing soaring property prices.
However, data obtained under freedom of information reveals that 1,480 properties purchased under the scheme have since been rented out or sold as investments. This represents a significant loophole, as the scheme's guidelines require buyers to live in the property within six months of purchase.
How the Loophole Works
Buyers can convert their primary residence into an investment property after meeting the initial occupancy requirement. While this is legal, it contradicts the scheme's core purpose of boosting homeownership rates. Critics argue that it allows wealthier buyers to exploit government support for financial gain.
The data shows that most conversions occurred in New South Wales and Victoria, where property prices are highest. This has led to calls for stricter enforcement and penalties for non-compliance.

Government Response and Policy Implications
Housing Minister Julie Collins stated that the government is reviewing the data and considering measures to close the loophole. Possible reforms include extending the occupancy period or requiring buyers to repay the guarantee if they convert to an investment within a certain timeframe.
Meanwhile, opposition parties have labeled the scheme a "failed policy" that benefits investors over genuine first-time buyers. The debate highlights the tension between stimulating the housing market and ensuring affordable homeownership for all Australians.
Comparison: Scheme Intent vs. Reality
| Aspect | Scheme Intent | Actual Outcome |
|---|---|---|
| Primary Goal | Help first-time buyers own a home | 1,480 properties became investments |
| Deposit Requirement | 5% deposit with government guarantee | Same, but loophole exploited |
| Occupancy Rule | Must live in property within 6 months | Converted after initial period |
| Target Audience | Genuine first-time buyers | Some wealthier buyers benefiting |
Key Takeaways for Prospective Buyers
- Check eligibility carefully before applying to avoid unintended investment classification.
- Understand that the scheme is subject to ongoing policy changes and potential stricter rules.
- Consult a financial advisor to assess whether the scheme aligns with your long-term homeownership goals.
- Stay informed about government reviews that may affect current participants.
FAQs
Can I rent out my home purchased under the 5% deposit scheme?
Yes, after living in the property for at least six months, you can convert it to an investment. However, this may breach the scheme's spirit, and future rules could change.
What happens if I convert my home to an investment?
You may be required to refinance without the government guarantee, and you could face penalties if the government tightens rules retrospectively.

Is the 5% deposit scheme still available for new buyers?
Yes, the scheme continues, but places are limited. The government is reviewing eligibility and compliance to prevent misuse.
Conclusion
The revelation that 1,500 properties under the first home buyers' scheme became investments is a wake-up call for policymakers. While the scheme has helped many, its integrity is under question. Prospective buyers should stay vigilant and informed as changes loom.
For more updates on Australian housing policies, check back with Grand Goldman's Australia section.
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