The Australian government's first home buyers' 5% deposit scheme has a surprising twist: nearly 1,500 properties bought under the program were later converted into investments. This revelation, based on newly released data, raises questions about the scheme's effectiveness in helping Australians achieve homeownership.
How the 5% Deposit Scheme Works
The scheme, officially known as the First Home Loan Deposit 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 was designed to reduce the barrier to entry for those struggling to save a larger deposit.
However, the data shows that a significant number of these properties are now being rented out, not lived in by the owners. This has sparked debate about whether the scheme is being exploited by investors or if changing life circumstances are driving the trend.
Key Findings from the Data
The report, obtained by Guardian Australia, reveals that 1,486 properties purchased through the scheme between 2020 and 2023 have been identified as investment properties. This represents a small but notable fraction of the total 90,000+ loans issued under the scheme.
Critics argue that this undermines the scheme's purpose, while supporters point out that many buyers may have moved for work, started a family, or faced financial pressures that necessitated renting out their home. The government has stated it will review the rules to prevent misuse.

Comparison Table: Scheme Intent vs. Reality
| Aspect | Intended | Actual Outcome |
|---|---|---|
| Primary Use | Owner-occupier housing | Some converted to rentals |
| Deposit Required | 5% | 5% (unchanged) |
| Property Count | All owner-occupied | 1,486 investment properties |
| Government Guarantee | 15% | 15% (unchanged) |
Implications for First Home Buyers
If you're a first home buyer, this news might make you wonder about the scheme's integrity. However, it's important to note that the vast majority of participants are using the scheme as intended. The key is to understand the rules: you must live in the property for at least six months within the first year of purchase.
Should you decide to rent it out later, you may be required to repay the government's guarantee or refinance. Always consult a financial advisor to ensure compliance.
What the Government Says
Housing Minister Julie Collins said the government is committed to ensuring the scheme helps those who need it most. "We are monitoring the data closely and will take action if necessary," she stated. "The scheme has helped thousands of Australians into their first home, and we want to keep it that way."
Key Takeaways
- 1,486 properties under the 5% deposit scheme became investments.
- The scheme remains popular, with over 90,000 loans issued.
- Buyers must occupy the home for six months initially.
- Potential rule changes may tighten eligibility and oversight.
- Consult a professional before making any property decisions.
FAQ
FAQ
Can I rent out my property bought under the 5% deposit scheme?
Yes, but only after living in it for at least six months. If you rent it out before that, you may breach the scheme's conditions and be required to repay the government guarantee.

What happens if I convert my home to an investment?
You must notify the scheme administrator. You may need to refinance to remove the government guarantee, and you could lose some benefits like stamp duty concessions.
Is the 5% deposit scheme worth it for first home buyers?
For many, yes, as it reduces the deposit hurdle. But consider your long-term plans and whether you can meet the occupancy requirement. Always seek professional advice.
In conclusion, the first home buyers' scheme has helped many, but the discovery of investment conversions highlights the need for vigilance. If you're considering using the scheme, stay informed and follow the rules to avoid penalties.
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