Screen Shot 2020-06-18 at 12.40.02 am
Brendan Coates

Brendan Coates

First-home buyers in the money as governments splash the cash

First-home buyers and investors are long-time competitors in the Australian property market. When investor activity is high, first-home buyer activity is low and vice versa.

During COVID-19, it’s first-home buyers that appear to be dominating the market for the first time in a long while.

According to housing finance data from the Australian Bureau of Statistics, the monthly value of new lending to investors has been trending lower since the beginning of the year. Meanwhile, figures show lending to first-home buyers has been consistently increasing since January 2019, with a small drop in April this year.

The value of lending to investors is historically greater than what is loaned to first-home buyers, mainly because most investors already own a property and have greater borrowing power. With first-home buyers and investors typically competing for similar stock, investors will usually win out.

But with weak investment conditions and the ability for first-home buyers to tap into significant government stimulus during the pandemic, it is likely first-home buyer borrowing will outweigh that of investors in the coming months.

What is driving demand from first-home buyers?

It’s a mixture of events that has led to this change in the market, which includes government stimulus, a change in investor behaviour and a rise in the rates of vacancy in rental properties.

1. Government stimulus

The federal government’s new HomeBuilder scheme, which is designed to boost the construction sector specifically targets first-home buyers wanting to build a new home. Some states have launched additional construction stimulus.

Government stimulus such as first-home buyer grants have been a successful driver of demand in recent years, and the HomeBuilder scheme will likely be no different in bringing forward demand from this buyer group between now and the end of the year – at the expense of investor demand.Neighbourhood aerial

Government stimulus amid COVID-19 has supported the housing market in the short term. Picture: Kate Hunter


First-home buyers who are still employed and have a solid deposit may see the introduction of HomeBuilder as an opportune time to build or purchase a new home. Especially considering any state of federal housing grants or concessions that were already in place are still available to them with the HomeBuilder grants.

2. Investors are pulling back

In the lead up to COVID-19, investors were already leaving the market creating space for first-home buyers to purchase homes.

Enquiry figures from realestate.com.au from the beginning of the year to the end of May 2020 show a drop in enquiry from investors, while there was a significant upswing in enquiry from first-home buyers.

Enquiries from first-home buyers in May alone were up 102% compared to May 2019, while enquiries from investors were -3.0% lower for that period.

However, since the pandemic hit, many potential first-home buyers have found themselves unemployed with people under the age of 30 recording much higher job losses than the rest of the working age population.

As a result, the housing market has also seen a sharp drop in transaction volumes, which now appears to be recovering