Data from Housing Australia reveals that 39,704 Australians have utilized the government’s 5% deposit scheme since income caps were removed last year. While the program was designed to assist first-time buyers, one in three participants now exceeds the previous income limits, with economists warning that the policy has increased debt levels and pushed property prices higher by boosting the purchasing power of those who likely would have entered the market regardless.
Between October 1 and April 30, the government-backed scheme supported 39,704 loans, consisting of 15,924 single borrower loans and 23,790 joint loans. According to data prepared for Senate estimates, 13,979 of these participants earned more than the former thresholds of $125,000 for singles and $200,000 for couples. This includes nearly 1,000 single earners making $200,000 or more and 1,251 couples with a combined income of $275,000 or above.
Under the 5% deposit scheme, a buyer with $50,000 in savings can borrow up to $1,000,000. If that same buyer were required to provide a traditional 20% deposit, their borrowing capacity would be limited to $200,000.
Why economists argue the scheme is inflating property prices
Independent economist Saul Eslake contends that the expansion of the program contributes to the nation’s housing challenges. Eslake stated that the scheme allows individuals to spend more on property than they would have otherwise, which ultimately drives prices upward. Because the government guarantees the lenders’ mortgage insurance, the program removes the traditional deposit barrier, effectively increasing the buyer’s debt capacity.
Amy Auster, chief executive of Policy Institute Australia, noted that removing income caps redirected government support toward individuals in stronger financial positions. Auster argued that while the intent to assist first-home buyers is clear, the current approach has not solved the underlying housing problem. The government previously lifted price caps to include properties up to $1,500,000 in New South Wales cities, with varying thresholds in other states, such as $1 million for south-east Queensland and $950,000 for Melbourne and Geelong.
The data suggests a disconnect between the program’s stated goal of increasing home ownership and its actual market impact. While the government averages 5,670 backed loans per month, total first-home buyer activity has shown only a marginal increase of less than 3% compared to the six months prior to the cap removal. This indicates that the scheme is largely being adopted by existing market participants rather than facilitating a surge of new homeowners.
What is the outlook for the scheme?
Data from the Australian Bureau of Statistics shows that first-home buyer activity has fallen as the market cools, despite the government’s efforts to lower the deposit hurdle.
Frequently Asked Questions
Who is eligible for the 5% deposit scheme?
The scheme is open to first-home buyers. Following Labor’s decision to fulfill a pre-election pledge, the previous income caps of $125,000 for singles and $200,000 for couples were removed.
How many loans has the scheme supported since the income caps were scrapped?
From October 1 to April 30, the scheme backed 39,704 loans, according to data from Housing Australia.
Has the scheme significantly increased the number of first-home buyers?
Data indicates the scheme has had a limited impact on overall home ownership. Average monthly loans for first-home buyers increased by less than 3% following the policy change, suggesting most participants would have purchased a home without the government backing.
Do you believe government-backed deposit schemes help or hinder market affordability for the average buyer?
