First Home Buyers Lead Property Market Charge as Investors Retreat
Australia’s property landscape is undergoing a significant demographic shift as first-time buyers emerge as the only segment actively increasing their market participation, even as broader lending activity slows.
New data from mortgage broker network Loan Market reveals that while investor activity continues to wane, first-time purchasers are bucking the national trend. After a modest 3% dip in July, applications from first-home buyers surged by 10% on a weekly average basis during the first half of August. Conversely, loan applications from established owner-occupiers and property investors have remained largely stagnant.
A Level Playing Field?
The cooling of the wider market follows three consecutive interest rate hikes and the Albanese government’s controversial decision to abolish negative gearing for most new investment purchases. Prime Minister Anthony Albanese has framed these reforms as a deliberate attempt to “level the playing field,” allowing aspiring homeowners to compete more effectively against established property portfolios.
The impact is evident in the numbers. While overall home loan demand fell by 5.4% in the June quarter according to the Australian Bureau of Statistics (ABS), investor-led lending dropped by a sharp 8.6%. In comparison, first-home buyer mortgages saw a relatively minor decline of just 2.9%.
In several regions, the trend is even more pronounced: first-home purchases in New South Wales and the ACT have outpaced the same period last year, while South Australia and Tasmania have hit their highest levels of first-home buying activity since 2021.
The Power of Government Incentives
Industry experts point to the federal government’s 5% deposit scheme as the primary catalyst for this resilience. By guaranteeing loans and waiving the costly Lenders’ Mortgage Insurance (LMI), the scheme has provided a vital pathway into the market.
“First home buyers now feel like the sentiment has swung in their favour, and investors feel like the sentiment swung against them,” said Peter Esho, CEO of property finance firm 13x. “There’s been a lot of buyers on the sideline for a long time… so that pent-up demand is going to keep it for the next few years and policy is obviously a big driver.”
Data from Cotality suggests that properties falling within the scheme’s eligibility price caps—which were recently expanded by the Labor government—have resisted the wider price drops seen elsewhere in the market. Since the program’s inception in 2020, over 320,000 Australians have successfully entered the property market, collectively saving more than $2.5 billion in insurance costs.
Market Disruption
The success of the government-backed initiative has caused ripples throughout the financial sector. Helia, Australia’s leading LMI provider, reported a loss of nearly $9 million in first-home buyer business during the first half of 2026 due to the expansion of the scheme.
Meanwhile, major financial institutions are adjusting their strategies. ANZ, the only “big four” bank to maintain steady mortgage application volumes in the June quarter, has attributed much of its stability to the 5% deposit scheme. Participants in the government program now account for one in every 20 new loan applications at the bank.
As the first home buyers sector continues to show surprising strength, the focus now shifts to whether this momentum can be sustained amid ongoing economic pressures and whether the government’s housing policy will continue to serve as the primary engine for market activity.
