The five per cent deposit scheme for first home buyers rolled out across Australia just over a month ago, but one investor has claimed it could end in disaster.
Mason Ellies is a property investor and a tradie turned construction manager, and he just rushed to buy his third property.
The 30-year-old from Adelaide just purchased a three-bedroom fixer-upper in early October for over $800,000.
He argued that the fact he evenhad to pay that much for a place that needs so much work is a sign that the scheme has already pushed up prices.
Mr Ellies explained to news.com.au that, although he would encourage everyone to buy property, he fears the scheme could just end in first homebuyer tears.
“I think it is a bit of a trap,” he said.
“I think it is a double-edged sword because if the government cared about people, they would wipe out stuff like stamp duty that they’re benefiting from altogether.”
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Every government since the early 2000s, when Australia’s property market first exploded, have been tasked with coming up with housing solutions.
It has become increasingly dire post-pandemic, and the median price for a house in Australia has risen to over $900,000.
Thousands of Australians are struggling to enter the market, homeowners are grappling with hefty mortgages, and renters are being charged exorbitant rents due to a lack of supply.
The Anthony Albanese government has now introduced the five per cent scheme, which was rolled out on October 1st and is meant to help people get on the property ladder.
It allows first-home buyers to purchase properties with just a five per cent deposit.
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The way the scheme works is the government provides a guarantee to participating lenders, which also eliminates Lender’s Mortgage Insurance, and first-time buyers avoid paying stamp duty.
There’s no income cap on the scheme; the number of spots in the scheme is also uncapped, and new property price caps have been introduced to reflect the current market.
The new scheme has already enabled many Australians to enter the market, but criticism has been raised that prices will be pushed higher due to increased demand.
The latest data from Cotality has shown a market surge, with the average home values rising 1.1 per cent over the month.
It has risen 6.1 per cent over the year.
Mr Ellies isn’t just worried about the scheme pushing up prices long-term, as he believes that will eventually flatten due to slow wage growth.
What he fears is that people will end up biting off more than they can chew financially and ending up in a mess.
The property investor said the scheme makes it easier for parents to help out their children and, while that sounds good in theory, he believes it creates a situation where first-home buyers are getting properties without any experience in saving.
Whereas having to pull together a 20 per cent deposit creates the good habits you need to be able to service a mortgage.
“They are going to end up getting stitched up,” he warned.
“The houses may end up going back on the market in 12 months time when they are failing on their repayments.”
He claimed that people are going to commit to owing 95 per cent of their mortgage to the bank and then get a shock when they realise “how hard it is”.
He added that houses could be getting “thrown back onto the market” pretty fast if interest rates do not end up trending down.
The 30-year-old argued that the five per cent deposit scheme has poured “fuel onto the fire” of the housing crisis.
Mr Ellies spends a lot of time studying the housing market because he is a passionate investor.
He owns three homes: one he lives in, one he rents out, and the third he has just bought and is still waiting to settle on.
The 30-year-old has built his property empire from scratch. He buys properties that need fixing up and then renovates and rents them out.
At the moment he lives in the first home he ever bought. which is a three-bedroom red-brick house located 15 minutes from Adelaide’s inner city.
The 30-year-old purchased that home in 2022 for $430,000; he invested $140,000 in renovations and recently had it valued at $1.2 million.
“I got the house for an absolute steal but the house was also a bomb when I got it,” he said.
Mr Ellies spent nine months renovating the property before moving in and an additional six months renovating it while living there.
His blood, sweat and tears went into increasing the value of his home.
“It is not money-driven for me. I love being creative, and people think I’m crazy, but I think when you have a passion, it is like going to the gym, it is like therapy,” he said.
“I do the tiling, carpentry, and my uncle is a plumber, and he will come and do bits and pieces, but I’ll give anything a crack.”
He loved renovating his own home so much that he bought an investment property in December 2024 with the equity from his first.
Once again, he purchased a three-bedroom home about 20 minutes from Adelaide’s city centre for $651,000.
He sunk $35,000 into the property renovating it, and recently got it valued at between $970,000-$1 million.
He has now rented out the home for $720 a week and, at the moment, it is negatively geared.
“It’s hard to get properties that are positively geared because of the demand for housing, because you are always somewhat overpaying,” he said.
His third property is another three-bedroom, but this time further out from the city and near the beach for just over $800,000.
The 30-year-old has chosen to keep investing locally because he wants to be able to fix it up himself.
“They are all in Adelaide and that is purely based on accessibility, so I can work on them after work and weekends,” he said.
“I pour sweat equity into them.”
Mr Ellies said that, right now, it isn’t exactly painless “paying three mortgages” by himself, but he is playing the long game.
The 30-year-old doesn’t think short-term; he doesn’t have any interest in just flipping a house and making an extra six figures.
“I couldn’t care about the $100,000 or $200,000; it’s about future-proofing,” he said.
He would love to reach a point where he doesn’t need to rely on a salary from work to service his mortgages, but rather have his investments provide him with an income.
The 30-year-old is aware that becoming a landlord during a housing crisis can be seen as contributing to the crisis – but he reasoned that he is merely providing housing.
“Everyone has different circumstances, and I’ve made sacrifices so that others can do the same,” he said.
“The harder I work, the luckier I get.”
