How property investors piled into Australia’s housing market

The share of lending to property investors is higher than it was five years ago, while the share of first home buyer lending has fallen, even as incentives for new property market entrants were on offer.

Investors had a 39.7 per cent share of housing finance commitments nationally, worth $43 billion, in the December quarter 2025, Australian Bureau of Statistics data analysed by Cotality shows, close to the highest share in nine years. First home buyers had a 17.8 per cent share, worth $19.3 billion.

Five years earlier, first home buyers had a 26.3 per cent share of housing finance commitments – higher than investors, who had a 23.8 per cent share.

Gerard Burg, Cotality’s head of research for Australia, said that, during pandemic-era 2020, there was economic uncertainty which was probably “off-putting” for investors.

“But there was support for first home buyers,” he said of a range of government incentives, including the First Home Loan Deposit Scheme (FHLDS), introduced in January 2020.

Still, rapid, yet uneven, growth in home values over recent years alongside ultra-low interest rates encouraged investors and caused them to take an increasing share of housing finance commitments by the end of 2025.

“Investors really seek capital growth, and so they will go anywhere where they can see the opportunity for that,” Burg said. The commitments data represents a firm offer to provide a loan, which has been accepted by the borrower.

Dr Shane Oliver, AMP’s chief economist, said there were periods when it was easier for first home buyers to “get in”, while investors tended to “head for the hills, and they come back later”, when there were periods of uncertainty, such as during the pandemic.

“Typically, when you find a lot of incentives for first time buyers, the first home buyer share rise,” he said of housing finance commitments, noting new buyers were also attracted by lower interest rates.

The FHLDS, now known as the Australian Government 5% Deposit Scheme, was expanded in October 2025. It allows first home buyers to purchase with a low deposit without lender’s mortgage insurance, up to revised price caps. The cash rate was also cut three times during 2025, but raised once since.

December quarter ABS data shows almost 32,000 first time buyers took out a mortgage, up 6.8 per cent compared to the previous quarter. The size of the average first home buyer loan rose by a record 8.5 per cent to $607,624 in the quarter.

Angus Gilfillan, chief executive of mortgage broker Finspo, said first home buyer demand had “moved almost in lockstep with how attractive the 5 per cent deposit scheme is”.

The 2025 changes were a “real circuit breaker” for first home buyers, he said with a step-up in inquiries and pre-approvals at Finspo since then.

“Late last year, we also saw a noticeable spike in investor demand. It felt like investors were trying to get in early, before first home buyers using the expanded 5 per cent scheme really hit the market,” Gilfillan said.

Investors took out a record 60,445 loans through the final three months of last year, ABS data showed, at a higher average sum of $716,711.

This comes as Canberra is reviewing ideas to reform Australia’s CGT discount as part of a Senate inquiry. Currently, taxpayers get a flat 50 per cent concession on gains for assets held for at least 12 months.

For first time buyers trying to buy at auctions the weight of investor finance meant there was more competition, experts say.

“Investors and first home buyers are often shoulder to shoulder at the same open homes. They’re typically chasing very similar stock, so changes in policy or pricing swing the balance quickly,” Gilfillan said.

Cotality’s Burg said that, despite incentives for first home buyers to purchase under certain caps, these lower-priced properties might still be of interest to investors as they had the potential to provide attractive capital growth.

“As a result, there might be some additional buying competition … within that segment of the market right now … also investors aren’t limited to those below-cap properties, in the same way that the first home buyers are,” he said.

Into the future, experts say it’s still early days as far as how large the impact of the 5 per cent scheme will be.

“That won’t show up in ABS commitments yet, because they lag pre-approvals, but we’d expect it to flow through over the next couple of quarters,” Gilfillan said.

Oliver said it was possible there might be “some rotation towards first home buyers over the next 12 months, as the full impact of the low deposit scheme starts to kick in, and at the same time higher interest rates potentially dampen the overall property market, making it a little less attractive for investors”.