Struggle St for most Aussies but opportunity knocks in one State

SUMMARY:

• First home buyers remain under pressure, with average loan sizes well below those of investors and existing owners.
• Victoria has emerged as the busiest state for new first home buyer loans, helped by softer price growth and higher investor taxes.
• Activity may slow through late 2025 as lower rates favour existing owners, before new government schemes in 2026 provide a much-needed lift.

The latest lending indicators data for the June 2025 quarter which was recently published by the Australian Bureau of Statistics (ABS) found that first home buyers continue to face challenges entering the market.

Over the June 2025 quarter, there were 28,861 housing finance commitments for first home buyers with a total value of $16.285 billion. Based on these figures, the average new loan size for an owner-occupier first home buyer nationally was $564,267.

The number of owner-occupier new loans over the quarter was 1.7 percent higher while the value was 5.7 percent higher. Compared to the June 2024 quarter, the volume of owner-occupier first home buyer loans was 2.1 percent lower and the value was 2.2 percent higher.

These figures highlight that the growth in the value of first home buyer lending is largely being driven by first home buyers borrowing more, rather than a greater number of first home buyers.

First home buyers remain a small portion of the housing market and they continue to face purchasing challenges when competing with non-first home buyers and investors, most of whom already have equity in the market.

This is highlighted by the fact that the average owner-occupier first home buyer loan size at $564,267 was more than $100,000 lower than the average investor loan size of $670,957 and more than $150,000 lower than the average owner-occupier non-first home buyer loan size of $745,174.

When first home buyers are competing with people that have the capacity to borrow and spend a lot more than they do, it's always going to be a challenge for them to buy.

This is only going to be further exacerbated as consumer sentiment improves and the amount that someone wanting to purchase a property can borrow increases due to falling interest rates.

Looking at the data across the individual states and territories, Victoria was the state with the largest number of loans to owner-occupier first home buyers over the June 2025 quarter.

There were 9,702 owner-occupier first home buyer loan commitments in Victoria over the June 2025 quarter, which was the largest quarterly volume since the June 2022 quarter and was 2.8 percent higher than the June 2024 quarter.

Throughout the other states and territories, the quarterly number of loans to owner-occupier first home buyers was 6,819 in New South Wales, 5,755 in Queensland, 1,757 in South Australia, 3,557 in Western Australia, 599 in Tasmania, 268 in Northern Territory and 819 in the Australian Capital Territory.

New South Wales and Western Australia were the only states or territories with fewer owner-occupier first home buyer loans in the June 2025 quarter compared to the June 2024 quarter.

In saying that loan volumes were higher in the September 2024 quarter than they were in the June 2025 quarter in each of Queensland and South Australia.

Tasmania and the two territories have also seen a lift in first home buyer participation with the 599 loans over the quarter in Tasmania, the highest volume since September 2021.

The 268 owner-occupier first home buyer loans in the Northern Territory over the quarter was the highest volume since September 2021 and the 819 loans in the Australian Capital Territory was the highest volume since September 2022.

First home buyer participation is growing mostly in markets where home price growth has been weaker over recent years.

The lack of price growth has deterred investors and, in some instances, slowed upgrading by existing owner-occupiers which has afforded first home buyers a greater opportunity to purchase than they have in the stronger housing markets.

Victoria is an interesting test case because the Victorian state government has increased taxes on investors.

The increase in taxes, along with other regulatory changes for landlords in that state, has led to fewer investor purchases and more investor selling.

When this is combined with weaker housing price growth over recent years, it has provided an opportunity to first home buyers to enter the market with relatively less competition from investors in particular.

This has led to a comparatively higher level of market participation from owner-occupier first home buyers in Victoria relative to all other states and territories other than Australian Capital Territory.

While nationally the number of owner-occupier first home buyer loan commitments made up 22.2 percent of all new loan commitments, in Victoria it was a much higher 27.9 percent and in the Australian Capital Territory it was 30.2 percent.

The latest data also provides information on people buying an investment property for their first property purchase.

Rent-vesting has become a buzzword over recent years. Essentially you buy your first home as an investment property and continue to live where you wouldn't be able to afford to own. Recently, the ABS has started to publish data on investor first home buyer loan commitments.

The rent-vesting numbers are low; over the June 2025 quarter there were 1,563 investor first home buyer loan commitments which was 3.6% higher compared to the previous quarter but 32.1% lower than the June 2024 quarter.

Higher interest rates have crimped rent-vesting activity, with the peak in activity over recent years occurring during the pandemic when interest rates were at record lows.

Investor first home buyer purchasing is most active in New South Wales and least active in Tasmania and the territories. Each state and territory have recorded a fall in investor first home buying activity over the past year.

What is interesting to note, is that because investor first home buying is a more niche market segment, and servicing an investor loan is typically more expensive than servicing an owner-occupier loan, the average investor first home buyer loan size at $579,655 is slightly higher than the average owner-occupier first home buyer loan size at $564,267.

In each state and territory except for Western Australia, Tasmania and the Australian Capital Territory, the average loan size for investor first home buyers is greater than the average for owner-occupier first home buyers.

Similarly, in each state and territory except for Western Australia and Tasmania, the annual increase in the average loan size for investor first home buyers has been greater than the increase for owner-occupier first home buyers.

This implies that a slightly more affluent cohort of first home buyers are buying their first home as an investment property than those who are buying an owner-occupier first home.

Whether an individual is an owner-occupier or an investor, it remains a challenging prospect to enter into the housing market for the first time. This is because you are competing with individuals who already own property and in most instances have equity which they can utilise to pay more for a home than those that don't.

State and federal governments all have incentives to help first home buyers enter the market however, the size of these incentives still doesn't really afford them a level playing-field when trying to compete with other buyer types.

The second-half of this year will be an interesting one for first home buyers. Lower interest rates will increase the advantage that existing property owners have over first-time buyers. This may lead to even low levels of participation from first home buyers.

As we move into 2026, new first home buyer schemes will become available that will allow first home buyers to buy sooner and with less equity.

The Albanese government announced today that it is bringing forward by three months to October 1 implementation of its 5 per cent deposit guarantee for all first home buyers purchasing properties up to a specified limit.

I suspect that many first time buyers will be keen to tap into these incentives and after a weak second-half of 2025, the first half of 2026 will see a lift, potentially quite a strong one, in first home buyer purchasing.