The type of buyer that just dropped out of the property market

The number of first home buyers looking to take out a home loan has fallen in a year even as property prices soften in some parts of the country and investors exit the market.First home buyer demand nationally rose at the end of 2025 and in early 2026, before dropping back in April, data from credit data company Equifax shows. By last month, mortgage demand from new home buyers was down almost 20 per cent compared with the same time in 2025.Higher interest rates, concerns over buying in a falling market, property-related budget reforms and a lack of supply have led to reduced demand from first home hopefuls, experts say. Confidence has also dipped among this cohort, with some now holding back as they wait for property prices to reach a floor.According to Equifax, demand for mortgages from first home buyers jumped by 13.7 per cent in October compared with the year prior. This was bettered only by a 17.1 per cent spike year-on-year in December.Equifax chief solutions officer Kevin James said its data tracks the number of loan inquiries made where an applicant has never had a mortgage, to determine demand. More first home buyers, he said, looked to enter the market in the second half of 2025 in part due to the October expansion of the Australian Government 5% Deposit Scheme.“We saw the first home buyers come in … and we saw some real positive stories come out of that,” he said.First home buyer mortgage demand jumped after the federal government expanded the 5 per cent deposit scheme.James BrickwoodBut by April this year, Equifax data showed demand for first home loans down 2.9 per cent on the same time in 2025. In May, demand was 13.4 per cent lower, and there was a 17.2 per cent year-on-year drop in June.Three rate hikes over 2026 and serviceability challenges had prompted first home buyers to hang back, James said, but now many were also taking a wait-and-see approach, expecting prices to soften as investor demand slows.“I think people are just waiting to see what’s going to actually happen with interest rates and with pricing,” he said.Cost-of-living pressures, rate hikes and weak consumer sentiment were helping to constrain activity generally, but Dr Nicola Powell, Domain’s chief residential economist, said first home buyers were also facing deposit hurdles and borrowing limits, with some now more cautious.“That caution is driven by the fact that prices overall are falling …they don’t want to buy on a Friday to find out their home is worth less than on a Monday,” she said. Sydney and Melbourne fell more than 3 per cent last quarter.“It means that they’re perhaps feeling apprehensive about buying in a falling market because they obviously don’t want to get into negative equity. But then it also drives this other thought process that, ‘if I wait a bit longer, I might be able to get greater value for money’.”Domain was expecting minor price falls nationally, with deeper falls in Sydney, Melbourne and Canberra, while banks were tipping further falls of about 5 to 10 per cent nationally.Jack Elliott, national first home buyer specialist at Alcove Mortgages, highlighted low confidence and a reduction in buying capacity due to higher interest rates. Still, some first-timers were making preparations for the upcoming spring selling season, with inquiries ticking up.“Naturally, winter is always a little bit slower. You’ve got fewer listings, fewer buyers, with fewer properties to purchase,” he said, adding clients reported less competition from investors now.Indeed, investors started to exit the property market after the federal budget in May introduced negative-gearing and capital-gains tax concessions reforms.According to preliminary Equifax data, there was a 9.8 per cent reduction in demand year-on-year in May from investors, or those with two or more mortgages. By June, there was a 12.7 per cent drop compared with the same time the previous year.“I think people are actually seeing some of the investor market softening,” James said.There is less demand from property investors for mortgages.James BrockwoodEnosh Tampoe, a mortgage and finance advisor at Smartmove, agreed there were fewer investors in the market now. But there were also fewer listings as some investors held on to their properties due to grandfathering of negative-gearing arrangements.“If you’re a first home buyer who’s actively looking, you can potentially get one for a good deal there, which a few of my clients have been able to do. But then, in saying that as well, they have obviously a lot less to pick from, given their supply has dropped significantly.”KPMG urban economist Terry Rawnsley said while first home buyers were sitting on the sidelines, so were investors.“When you’ve seen the investor activity drop off historically, you see house-price-values growth cool, which is an opportunity for first-time buyers to get into the market,” he said.“But I think, just given levels of uncertainty at the moment, probably … the next six months, everyone’s going to be sort of sitting on their hands, waiting to see what happens with prices, interest rates, and the broader economy.”Property listingsFrom our partners