Nearly 1,500 properties bought using first home buyers’ 5% deposit scheme converted into investments

Government’s First-Home Buyer Guarantee Sees Record Investment Conversions

Wanderstayfinder.com – Australia’s flagship housing assistance program has facilitated the conversion of nearly 1,500 properties from owner-occupied homes to investment assets since its inception, revealing shifting patterns in how first-time buyers utilize government support. The 5% deposit scheme, which allows participants to borrow 95% of a property’s value with the government covering the shortfall, has become increasingly popular among higher-income earners following recent policy amendments.

New figures obtained through Senate estimates demonstrate that 1,486 homes were reclassified as investment properties between the program’s 2020 launch and May 2026. These conversions represent a modest fraction of the 208,000 total guarantees issued during this period, yet they highlight an evolving dynamic in how Australians approach property ownership with government backing.

High-Income Earners Join the Scheme

The Labor government’s October 2025 decision to remove income exclusions has significantly broadened the scheme’s reach. Monthly purchase volumes have climbed from approximately 3,400 to over 5,600 homes since the policy change, suggesting strong demand across income brackets.

Recent analysis indicates that 155 single participants and 92 couples have accessed the program while earning above $300,000 and $400,000 respectively. The top recipient was a couple earning more than $674,000 annually, demonstrating that the scheme now serves a diverse cross-section of Australian households rather than exclusively targeting lower-income buyers.

There are some markets around the country, where people, even on relatively good incomes, have found it difficult to get a toehold in the market.

Treasurer Jim Chalmers defended the expanded eligibility during an ABC interview, noting that certain regional and metropolitan markets present affordability challenges even for moderately well-paid professionals.

Political Debate Over Scheme Intent

The inclusion of wealthier participants has sparked discussion about whether the program is achieving its original purpose. Greens housing spokesperson Barbara Pocock emphasized that the initiative was designed primarily to assist first-home buyers on lower incomes secure housing.

It shouldn’t benefit the wealthy and property investors.

When questioned about whether investment purchases undermine the scheme’s objectives, Housing Minister Clare O’Neil’s office clarified that participants who cease living in their homes are no longer covered by the government guarantee. These owners may choose to rent or sell their properties without being compelled to refinance or liquidate their assets.

Bank Monitoring and Participant Obligations

Financial institutions play a crucial role in ensuring participants comply with owner-occupation requirements. NAB’s home ownership executive Lin Lu explained that the bank actively engages with customers whose circumstances change, working collaboratively to determine appropriate options.

Mortgage broker Bob Tasevski noted that buyers typically strive to maintain their guarantee coverage, as banks would likely charge the unpaid lenders’ mortgage insurance if participants move out without proper arrangements. Most lenders do not waive these fees unless exceptional circumstances apply.

While the government has not committed to preventing fraudulent rental arrangements, Housing Australia monitors rental listings, property transaction records, and address changes to verify that properties remain owner-occupied as intended.

Strong Financial Performance

Participants in the 5% deposit scheme demonstrate robust financial health compared to the broader homebuyer population. Housing Australia’s data reveals that 89% of participants are ahead on their loan repayments, indicating strong repayment capacity even amid rising interest rates.

Since the program began, 1,392 of the 207,000 guarantees have fallen more than 90 days behind on payments, with 436 still in arrears by May. However, a separate dataset shows that only two households out of 45,300 homes purchased under the expanded scheme have fallen into arrears, suggesting improved outcomes for newer participants.

The government has covered just 13 defaults over the scheme’s lifetime, totaling $604,537 in costs. Most of these claims emerged within the past twelve months, coinciding with periods of economic uncertainty. Despite rising interest rates and declining house prices increasing default risk, fewer than one percent of all Australian home borrowers currently find themselves in negative equity positions.

Market Implications

The rapid growth in eligible property prices under the scheme—outpacing broader market movements while declining more slowly—suggests that government-backed purchases are influencing certain segments of the housing market. As more Australians access the program with reduced mortgage insurance costs, the competitive landscape for first-home buyers continues to evolve.

The combination of expanded eligibility, strong participant repayment rates, and minimal government exposure to defaults indicates that the 5% deposit scheme remains a viable tool for addressing Australia’s housing affordability challenges across multiple income levels.