Property Investors Are Outpacing First Home Buyers: What the Lending Data Shows
The balance of power in Australia’s property market has shifted. Over the past five years, investor lending has climbed steadily, and the share of new home loans going to property investors now outweighs what it was pre-pandemic. For first home buyers already struggling with affordability, this adds another layer of competition.
What the data shows
According to recent ABS lending data and analysis from the SMH, the share of home lending has reversed in favour of investors. Several factors are driving the trend:
- Strong rental yields: Low vacancy rates across most capital cities have pushed rents higher, improving returns for landlords
- Capital growth expectations: Despite rate rises, national dwelling values are up 9.9% over the past year
- Equity advantage: Existing property owners can leverage equity from their current holdings, bypassing the deposit hurdle that first home buyers face
- Negative gearing and CGT discount: Tax incentives continue to make property investment attractive for higher-income earners
Where investors are buying
The investor surge isn’t uniform across the country. Markets with the strongest capital growth, particularly Brisbane (up 17.3% annually) and Perth, have attracted the most investor activity. These are the same markets where first home buyers are being priced out fastest.
Sydney and Melbourne, where values have flattened, are seeing a different dynamic. Higher listings and softer prices could create opportunities for first home buyers willing to enter these markets.
What this means for first home buyers
The news isn’t all bad. Experts predict more first home buyers will enter the market through 2026, supported by:
- Government schemes: The First Home Guarantee, Regional First Home Buyer Guarantee, and state-level stamp duty concessions continue to lower the barrier to entry
- Softer markets: Sydney and Melbourne’s flatline creates negotiating power that didn’t exist 12 months ago
- New supply: A surge in new listings (particularly in Sydney and Melbourne) is giving buyers more choice
The key for first home buyers is working with a mortgage broker who understands the current lending landscape and can help structure a competitive application.
What this means for investors
Investors need to be careful about chasing momentum. Brisbane’s 17.3% annual growth has some analysts flagging overvaluation concerns, with the city now Australia’s second most expensive market after Sydney (median dwelling value $1,046,000).
Key considerations for property investors right now:
- Interest rate risk: With the RBA cash rate at 3.85% and another hike possible in March, factor in higher repayments when running your numbers
- Rental yield vs capital growth: In overheated markets, yields can compress even as prices rise. Make sure the rental income stacks up, not just the growth forecast
- Diversification: Concentrating your wealth in a single asset class (and often a single property) carries risk, especially with market volatility increasing
The bigger picture
Australia’s property market has always had tension between investors and owner-occupiers. What’s different now is the speed of the shift. A mortgage broker can help both groups navigate the current environment, whether you’re structuring your first home loan or optimising your investment portfolio.
Ready to take the next step?
Whether you’re a first home buyer or a property investor, getting the right mortgage advice makes a real difference in this market.
Frequently Asked Questions
What share of home lending goes to investors?
Investor lending has reversed its decline from 2020 and now accounts for a larger share of new home loans than at any point in the past five years, driven by strong rental yields and capital growth expectations.
Is it harder for first home buyers to compete with investors?
In many markets, yes. Investors often have equity from existing properties, making it easier to meet deposit requirements and compete at auction. However, first home buyer activity is expected to increase through 2026 thanks to government schemes and falling prices in some markets.
Should I invest in property or buy my first home?
This depends on your financial situation, goals, and local market conditions. A mortgage broker or financial adviser can help you compare the numbers for your specific circumstances.
