Key facts
- Nearly 1,500 properties purchased through the 5% deposit scheme have been converted into investments.
- The scheme allows first-time buyers to borrow 95% of a property's value with a government loan guarantee.
- High-income earners, including couples earning over $674,000, have utilized the scheme after income caps were removed.
- The scheme has issued 208,000 guarantees since its launch.
- Only 13 defaults have occurred, costing the government $604,537.
Australia's government-backed 5% deposit scheme for first-time homebuyers has seen nearly 1,500 properties purchased through it subsequently converted into investment properties, according to new data from Housing Australia. The scheme, which allows eligible buyers to borrow 95% of a property's value with the government guaranteeing the loan and waiving lenders' mortgage insurance, has issued over 208,000 guarantees since its inception.
These conversions represent a small fraction of the total guarantees. However, the trend has drawn criticism from figures like Greens housing spokesperson Barbara Pocock, who argue the scheme should primarily benefit lower-income first-time buyers and not wealthy individuals or property investors. A spokesperson for the Housing Minister stated that once a participant transitions out of the scheme and the government guarantee is no longer active, the owner is free to decide the property's use.
Brokers note that buyers typically try to avoid leaving the scheme to circumvent potential lenders' mortgage insurance charges. Banks work with customers whose circumstances change, discussing available options. Housing Australia monitors rental listings and participant activity to ensure properties remain owner-occupied, though the government has not ruled out the possibility of fraudulent rental arrangements.
The scheme's popularity has surged since October 2025, when income caps were removed, allowing high-earners, including couples earning over $674,000, to participate. Treasurer Jim Chalmers defended this, citing market difficulties even for those on good incomes. Despite these concerns, participants generally maintain strong financial standing, with 89% ahead on repayments, and the government has only covered 13 defaults totaling $604,537 over the scheme's lifetime.