The balance between first home buyers and investors is shifting. Fresh lending data shows mortgage applications from first-timers rose 10 per cent in early August, while loans to investors buying existing properties dropped 14.8 per cent over the June quarter. That divergence creates less competition in parts of the market where the two groups typically clash: apartments, townhouses, and entry-level houses.
The timing matters. This isn’t happening in isolation, it follows three rate rises earlier this year, sustained pressure on borrowing capacity, and speculation about potential tax changes affecting investor returns. The question is whether first home buyers are gaining durable ground or catching a brief window before investors return.
The numbers behind the pullback
Total new housing loans fell 5.4 per cent in the June quarter, according to the Australian Bureau of Statistics. Investor loans dropped harder, down 8.6 per cent overall. The sharpest retreat was in established homes, where investor lending fell 14.8 per cent.
Meanwhile, investor loans for new housing rose 4.4 per cent to a record high. That split tells you investors are becoming more selective about where they deploy capital, favouring new builds over existing stock, likely driven by tax treatment, depreciation schedules, and concerns about maintenance cost blowouts in older properties.
For first home buyers, the practical effect is fewer competing bids on established homes. That doesn’t make every property suddenly affordable, but it does mean more time to review contracts, organise building inspections, and negotiate without the pressure of an investor with deeper pockets moving faster.
Who benefits and who doesn’t
If you’re a first home buyer with stable income, a deposit saved, and borrowing capacity that comfortably covers repayments at current rates, this is one of the more interesting windows in recent years. Less investor competition means properties may sit on the market longer, vendors may be more willing to negotiate, and you’re less likely to be outbid by a cash-flow buyer chasing yield.
**The catch**
– Mortgage rates remain high at 4.35 per cent cash rate, with no cuts signalled
– Borrowing power is still constrained by serviceability buffers and living cost assessments
– The 5% Deposit Scheme helps you enter with a smaller deposit but doesn’t reduce repayments, a larger loan means higher monthly costs
– One quarter of data isn’t a trend, if inflation eases and rate-cut expectations firm up, investors could return quickly
If you’re already stretched at your borrowing limit, a slightly lower purchase price won’t solve the affordability problem. The safer play is to pressure-test repayments: can you still manage the loan if rates rise again, income changes, or unexpected costs hit?
What’s driving the investor retreat
Investors are pulling back from established homes for three reasons. First, borrowing costs have risen sharply, the cash rate has climbed from 0.1 per cent in early 2022 to 4.35 per cent now, and banks have passed those increases on in full. Second, rental yields in many markets haven’t kept pace with higher mortgage rates, compressing cashflow. Third, uncertainty around tax settings, particularly negative gearing and capital gains treatment, is making some investors wait for policy clarity before committing capital.
The shift toward new builds is easier to explain: depreciation benefits, fewer immediate maintenance issues, and some state-level incentives for new housing supply. But new builds take time to settle and don’t directly ease competition in the established-home market where most first home buyers shop.
Scenarios for the next six months
Base case: investor lending stays subdued through the rest of 2026 as the Reserve Bank holds rates and inflation data remains mixed. First home buyers continue to gain modest ground, but affordability constraints limit how many can actually transact. Properties priced realistically move; those priced at 2024 peak levels sit.
Upside for first home buyers: inflation falls faster than expected, the RBA signals rate cuts in early 2027, and investor appetite stays muted. Competition eases further, giving first-timers more choice and negotiating room before investors return.
Downside: inflation proves stickier, the RBA hikes again, and borrowing capacity tightens further. Fewer first home buyers can service loans at higher rates, and the apparent window closes without many transactions occurring.
Red flags to watch
July’s monthly Consumer Price Index (due 26 August) will shape expectations. If inflation holds above the RBA’s comfort zone, another rate rise remains possible. That would compress borrowing power further and could stall the first home buyer uptick before it becomes a sustained trend.
Also watch whether the 10 per cent rise in first home buyer applications translates into actual settlements. Applications are leading indicators, but approvals, settlements, and price outcomes are what matter. One month of higher applications doesn’t confirm a lasting shift.
Finally, track investor sentiment around tax settings. If policy clarity emerges, or if investors decide current settings are stable enough, capital could flow back into established homes quickly, closing the window for first-timers.
What to do if you’re ready
If you’ve got your deposit, stable income, and borrowing capacity confirmed, use this period to inspect properties without rushed timeframes. Check contract terms carefully, organise independent building and pest inspections, and test your repayment capacity against a scenario where rates rise another 50-100 basis points.
Don’t rely on price falls to make a property affordable, focus on whether you can manage repayments in a higher-rate environment. If the numbers only work at today’s rates with no buffer, the property is too expensive.
For renters not yet ready to buy, the investor shift toward new builds may eventually add rental supply, but that’s a 12-24 month timeline. Immediate rental market pressure won’t ease until those new properties settle and hit the market. If housing stress is already a factor, [rental affordability pressures are hitting hard in some markets](https://www.apreview.com.au/housing-stress-threshold-wa-130k-rental-affordability/), waiting for new supply to materialise isn’t a plan.
Bottom line
First home buyers have less competition right now, but the window is conditional. Investor retreat is real but reversible. Borrowing costs remain high. The opportunity is modest, not transformational. If you’re ready and the numbers work with a safety margin, act. If you’re stretching to make it fit, the reduced competition doesn’t change the risk profile.
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General info, not financial advice.
