Help to Buy Explained: How 50x Leverage Could Reshape Australia’s Property Market. EP120

On 5 December, the Federal Government’s “Help to Buy” scheme officially goes live. And this is not some minor policy tweak. This is the government stepping directly onto the field, carrying 50-times leverage, charging straight into the property market, and actively speculating in housing. You heard that right: 50-times leverage. As long as you’ve got a 2% deposit, the remaining 98% is split—part of it is carried by the government, the rest is lent to you by the bank. What does that mean? People who originally couldn’t afford to buy, who couldn’t save a deposit, are now being dragged into the housing market by this policy. Once these buyers—who effectively “don’t have money”—are pushed into the market by policy incentives, the problems will start to snowball. The deposit is lowered to almost zero. The government becomes your biggest partner. Is that really about helping you into a home, or is it tying you and the entire national economy to the same risk? If the market turns in 2026, and these buyers can’t keep up with repayments and end up drowning in debt, the issue will no longer be just “it’s hard to buy a home”. It could turn into a giant black hole in the financial system. So today, we’re going to examine the policy and explain it clearly. Is the 2026 property market a boom or a bust?

Help to Buy Scheme

The Help to Buy scheme is basically the Federal Government becoming your “silent partner” and buying a property with you. As long as you can pull together a 2% deposit, the government will tip in the big chunk. If you’re buying an existing home, the government puts in 30% of the price. If you’re buying a brand-new property, it puts in 40%. The remaining 60% to 70% comes from a bank loan. So with just 2% of your own money, you’re controlling 100% of the asset. In finance terms, that’s a 50-times leverage.

But there’s no free lunch. This “partner” comes with conditions. First, you must be an Australian citizen and at least 18 years old. Second, your income is capped quite tightly: for a single applicant, your annual income can’t be more than $100,000; for a couple or joint applicants, it can’t exceed $160,000. That’s your taxable income. On top of that, you can’t own any other property in your name, whether it’s in Australia or overseas. There are also location and price limits you have to meet. Each state has its own price cap. Buying in Sydney and buying in a remote regional area have different ceilings. The exact numbers are set out in Housing Australia’s latest tables.

One more thing to watch: at the time we’re recording this, Western Australia and Tasmania are not participating, and the only compliant lenders are Bank Australia and CBA. The scheme opens for applications on 5 December 2025. Across the whole country, there are only 10,000 places per year, and a total of 40,000 places over four years. In other words, it’s a “miss out if you’re slow” game. Competition will be concentrated in the first few months of each year. So how does the application process actually work?

First, you go to a participating lender to do an assessment and submit your home loan application. Only CBA and Bank Australia can take the applications for now. You start with a pre-approval. The bank checks your income, your debts, your overall position, and if you pass, they give you a kind of “entry ticket”. Once you’ve got that pre-approval, you have 90 days to find a property and sign a contract. If you manage to buy within that period, then on settlement day, the government’s contribution and the bank’s money are both paid through to the seller. Existing homes, off-the-plan apartments, and house-and-land packages can all qualify, but each category has its own detailed rules and conditions.

Stamp duty, legal fees, building and pest inspections – all of that comes out of your pocket. The government doesn’t reimburse a cent. And while you don’t pay interest on the government’s 30%–40% equity share, every holding cost is still yours: council rates, strata fees, repairs and maintenance, and eventually the selling costs when you decide to sell. The government, even as a “shareholder”, doesn’t chip in on any of this. You’re the one paying.

Then we get to the key question: how are profits and losses worked out? This scheme is set up as “shared equity”. When you sell in the future, if the property price has gone up – say it’s risen by $1 million – the government takes its 30% or 40% share of that gain, and the rest of the profit is yours. That sounds pretty good, right? But what if prices fall? The government will also take on its share of the loss. On paper, it looks like the government is providing you with a safety net. But don’t forget – you still have to pay back the bank. If prices fall hard enough, the sale proceeds, after you’ve paid out the government’s portion, might not even be enough to clear the mortgage. That’s when you slip into negative equity. Because the repayment order is: The bank gets paid first, then the government, and only after that, whatever is left is yours.

Officially, it’s designed to help low- to middle-income earners – people like nurses, teachers, and other “essential workers” – to afford a home. But from a market perspective, it's lifting demand in a market already with a short supply. Now you suddenly have tens of thousands of extra buyers, all holding government-backed approvals, competing for the same pool of entry-level homes. Where do you think prices are going to move? In particular, properties that sit right around the price cap limits are almost certain to see a sharp jump in price. On paper, the intention is to “help people buy a home”. In practice, it may end up “helping to push prices up”. Any policy that works purely from the demand side really only has one long-term result: higher property prices.

Federal vs State Governments

This time, the Help to Buy scheme is at the federal level, implemented by Housing Australia. But this isn’t the first time Australia has tried something like this. In the past, many states and territories have run their own versions of “help to buy” schemes.

Take Victoria’s Homebuyer Fund (VHF) as an example. That’s seen as one of the more “successful” cases, because the barriers to entry were relatively flexible and a lot of people did manage to get into the market through it. But what was the outcome? Entry-level properties in Victoria saw a big jump in transaction volumes, and prices were pushed up along with it.

Then look at Western Australia. Their Shared Equity Scheme has been running for many years, mainly through Keystart loans. It genuinely helped a lot of buyers, but that was built on a foundation where WA property prices had been relatively stable over a long period. The most awkward case this time is Tasmania. They’ve simply said they won’t take part in the federal scheme. Their line is that they’ve got policies that are better suited to local conditions—or to put it another way, they don’t want the federal government reaching too far into their territory. WA, on the other hand, is participating, but because of system integration issues, they won’t actually start implementing it until 2026. So, what do we learn from the state-level experience?

The biggest issues are places and funding. In the past, under Victoria’s VHF, once the pool of money was used up, the scheme had to be paused, leaving buyers on edge and full of uncertainty. Now, under the federal version, there are only 10,000 places a year for the whole country. Compared with national demand, that’s a drop in the ocean. This is likely to create a “lottery effect” – those who secure a spot feel like they’ve won a prize; those who miss out can only watch prices run away from them, or feel forced into buying a more expensive property. Historically, state schemes have often created sharp price jumps in very specific pockets of the market—usually those suburbs where prices happen to sit neatly under the eligibility cap. For example, homes under $600,000 might surge in price, while those in the $600,000 to $800,000 range suddenly become much less attractive and sit on the market. This kind of distortion is very likely to play out on a national scale once the federal scheme kicks in. Is this really about helping buyers—or helping developers clear stock? Everyone needs to weigh that up carefully. It’s possible that this policy becomes the final push on the lower end of the market before it cracks.

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Market Impact and Potential Risks

Now, let’s walk through what might happen in 2026 once this scheme is fully in place. First, market trends will be artificially distorted. Think about it: every year, 10,000 buyers armed with “50-times leverage” rush into the market. Which properties are they going after? They will naturally target entry-level homes that sit under the price caps. That means liquidity at the lower end of the market can dry up almost instantly, and prices at that level can spike. You might be someone who has worked hard to save a 20% deposit as a genuine first-home buyer. Suddenly, you realise your competition is someone who only saved 2%, but has the government backing them. Can you still afford to buy? This dynamic can push ordinary buyers into taking on more leverage themselves, or force them to chase more expensive properties instead. That’s how a chain reaction starts.

So, where does the real risk of a blow-up sit? The biggest landmines are negative equity and income reviews. The rules spell it out clearly: the government will regularly review your income. If you get promoted and your pay rises, and your household income exceeds $160,000 (or $100,000 for singles) for two consecutive years, the government may ask you to start repaying and buying back its share. You’ve finally managed to buy a home. Two years go by, and suddenly you receive a notice telling you to come up with hundreds of thousands of dollars to buy out the government’s equity. Can you actually do that? If you can’t, you’ll have to go back to the bank and refinance. If interest rates are high at that time, can you handle the repayments? And if you can’t? You may be forced to sell.

Now imagine this happening in 2026, if the economy falls into recession and unemployment rises. For people who only have 2% equity in their home, their ability to withstand shocks is extremely weak. If prices fall by just 2%, their equity is wiped out. If prices fall by 5%, they are already in debt. At that point, it’s not just about individuals going bankrupt. The government – which ultimately means taxpayers – will be holding a large pile of devalued property shares. That is where the real systemic risk lies.

Some analysts, including SQM Research, have already warned that similar stimulus policies could push property prices more than 15% higher over six years. If that kind of artificially inflated bubble bursts, no one gets away.

5% Deposit vs Help to Buy

At this point, many people will be asking: “I want to buy a home as well. Should I choose the First Home Guarantee (the 5% deposit scheme), or this new Help to Buy?” These two are built on completely different logics.

Let’s start with the 5% deposit scheme, the First Home Guarantee. The upside is this: even though you only start with 5% equity, 100% of the future capital growth belongs to you. The government only stands in as a guarantor so you can avoid paying LMI (lenders' mortgage insurance). It doesn’t take any share of your profits. The downside is that your loan-to-value ratio is as high as 95%. Your monthly repayments are heavy. You owe the bank a lot of money. If interest rates are high, every month feels like you’re working just to pay the bank. This scheme suits buyers with higher income and cash flow – people who can manage large repayments and who genuinely believe property prices will rise strongly, because all the upside will be theirs.

Now, let’s look at Help to Buy. The upside here is a much lower loan ratio – only 60% to 70%. The government contributes the other 30% to 40%, and you don’t pay interest on that portion. Your monthly repayments are much lighter and in some cases might even be cheaper than renting. The downside is that the property is not fully yours. When the price goes up, you have to share 30% to 40% of the profit with the government. This is what you might call “sacrificing future gains in exchange for comfort today”. On top of that, places are very limited – only 10,000 per year – so you are going to need a lot of luck.

Help to Buy suits people with lower incomes, weaker borrowing capacity, or those who cannot qualify for a large enough loan under normal rules. For them, just getting into the market and having a place to live is more important than maximising profit. The 5% scheme was expanded in October 2025 and effectively no longer has a hard cap on places. Help to Buy, on the other hand, is capped at 10,000 places a year and will be intensely competitive. The 5% plan pushes you to take on more debt to buy a home. What it inflates is the size of the credit system. Help to Buy is a direct government equity injection. What it inflates is the nominal price of the asset.

The 5% scheme is most vulnerable to interest rate hikes – because the debt load is heavy. Help to Buy is more vulnerable to pay rises – in case you get pushed out of the scheme – and to flat or weak price growth, because you’ve given up the chance to enjoy big leveraged gains.

If you really want to choose between them, my suggestion would be this: If you’re young and your income has strong growth potential, choose the 5% scheme. Service the debt, and keep all the future profit for yourself. If you prefer stability and your main goal is simply to have a home to live in, choose Help to Buy. Let the government share some of the risk with you—but go in only when you know that this is not the property that will make you rich.

My summary of Help to Buy is this: the government is using taxpayers’ money to invest in property, and it has found itself a very responsible long-term “tenant”. This tenant doesn’t pay rent, but covers all the costs of getting in, all the holding costs, and all the selling costs at the end. The government becomes a hands-off investor. After the property is sold, the order of repayment is: The bank, the government, then you. So when the property makes money, the government and the owner both profit. When it loses money, the individual bears the loss first, and only then does the government take a hit.

With Help to Buy going live on 5 December, Australia has effectively stepped into a new phase of nationwide property speculation. Whether you like it or not, everyone in the country is now part of this game. If you don’t own a home, the tax you pay is being used by the government to help someone else with their deposit or to act as their guarantor.

For investors who already hold low-end investment properties, have owned them for more than ten years, and are getting close to retirement, 2026 could be a window to “get out” or lock in profits at the lower end of the market. A wave of buyers armed with government money will be coming in to take those properties off your hands. For those thinking about buying low-end properties as investments, you need to move quickly. If you wait until the second half of 2026, the current price uplift from this policy may well have faded. And for people planning to use the policy to get into their own home, keep these key points in mind from today’s analysis: See clearly the cost of the leverage behind the scheme, think carefully about your future income, and don’t buy just for the sake of “getting in”.

Help to Buy will not, by itself, change the overall direction of the property market in 2026. Its reach is much smaller than the 5% deposit program. What it will do is generally push up prices at the very bottom of the market. The real direction of the 2026 property market will still depend on the broader economy, lending policies, and interest rate settings.

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