First Home Buyers Increase Loan Applications as Property Investors Retreat

Australia’s housing market is experiencing a significant transition following federal budget reforms that altered property taxation and restricted negative gearing. Treasurer Jim Chalmers introduced changes making negative gearing available only for new builds, while capital gains tax modifications reduced the appeal of purchasing established homes for rapid appreciation, according to smh.com.au. Prime Minister Anthony Albanese’s clampdown on investors was intended to assist first-home buyers, but the policy shift has instead triggered a broad investor retreat from established housing while reshaping demand across multiple price points and regions.

Property Market Shifts as Investors Retreat

Data from the Australian Bureau of Statistics (ABS) showed that overall home loan demand fell by 5.4% in the June quarter compared to the prior quarter. While investor loans dropped by 8.6% on a seasonally adjusted basis, first-time buyer mortgages fell by a more modest 2.9%. According to data from Theguardian, first-time buyers were the only cohort applying for more loans in August compared to June in figures from mortgage broking company Loan Market, offsetting drops among other groups as sentiment shifted.

Impact on First Home Buyers and Government Scheme Support

First-home buyer engagement has varied amid rising interest rates, cost-of-living pressures, and sliding property values. While some institutional data pointed to declining application volumes—such as Westpac reporting an 18% slip among owner-occupiers and a 32% drop among first-time buyers—demand has concentrated heavily on properties eligible for government backing. Peter Esho, chief executive of 13x, noted that new entrants feel sentiment has swung in their favor and pent-up demand will persist.

First Home Buyers Increase Loan Applications as Property Investors Retreat — Photo: news.com.au

Demand has clustered around properties meeting the eligibility caps of the government’s 5% deposit scheme, which allows buyers to borrow up to 95% of a property’s value with a government guarantee that waives lenders’ mortgage insurance. Housing Australia data indicates that before the federal budget, the agency was issuing 188 mortgage guarantees per day. Housing Minister Clare O’Neil stated that scheme participants collectively saved more than $2.5 billion in LMI by the end of July, with more than 320,000 people becoming homeowners under the program since 2020.

Investors Pivot Toward New Builds and Affordable Suburbs

With negative gearing restricted to new construction, investor activity has pivoted toward newly built homes and house and land packages. ABS figures showed investors applied for a record number of loans for newly built homes in New South Wales over the June quarter, pumping a record $1.53 billion into the sector. Loans taken out by investors to build new homes climbed 4.4% in the quarter and were up 20% over the year.

PM of THAILAND- JOINT MEDIA STATEMENT — Photo: realestate.com.au

This shift has placed first-time buyers and investors in direct competition in Sydney’s new housing developments and lower-priced suburbs. Loan Market data identified that the largest rise in investment loan demand occurred in outer Sydney suburbs including Kellyville Ridge, Marsden Park, Schofields, Box Hill, Edmondson Park, Cecil Hills, and Currans Hill. Buyer’s agent Nathan Birch explained that reduced borrowing power for first-time buyers and a need for better cash flow among investors following the loss of gearing perks on established properties have pushed both groups into the same affordable markets.