First home buyers are starting to step back and investor demand is slumping in all areas except new property, as Australia's housing market enters a downturn. This was reported by Qazaqyia.kz citing The Guardian.
Research shows the market is transforming, nearly two months on from a third consecutive interest rate rise and sweeping tax reforms.
First home buyers are getting cold feet in the face of rising interest rates, ending a boom in demand backed by the government's 5% deposit scheme. They had accounted for more than 10,000 new loans a month from October, when the scheme expanded, until March, the Australian Bureau of Statistics has reported.
Credit agency Equifax reported home loan applications in May were 10.9% lower than May 2025 – while first-timer applications were down 13.4%.
Loan Market saw first home loan applications fall 20% in June compared to the same month in 2025.
Another way of tracking entry-level activity is by comparing price growth in homes eligible for the popular 5% deposit scheme with those that aren't. Homes are eligible if they are priced below $1.5m in NSW cities, $1m for south-east Queensland, $950,000 for Melbourne and Geelong, $850,000 for Perth, $900,000 for Adelaide and $700,000 for Hobart, with varying levels in the regions.
Data from the property insights platform Cotality, pulled exclusively for Guardian Australia, shows property prices outside the scheme's price caps began falling in April. Properties below the caps rose faster in price, for longer, but began to fall in June.
Lauren Jones, a Brisbane buyers' agent, said she had seen only some first home buyers out and about, despite the quieter market working in their favour. "This is what first-time buyers have been waiting for … and they're just not taking the opportunity," Jones said.
The Reserve Bank's interest rate rises have pushed the average new loan rate above 6% annually, likely forcing some first home buyers to give up. Jones said buyers had also been spooked by falling prices. "They freak out when the market's freaking out," she said. "First time buyers are out there putting in aggressive offers when the market's hot, but the moment the market cools down, they back off."
While more affordable homes are starting to cool, Australia's most expensive homes are recording deeper declines. Higher-end home prices are slumping in Sydney, Melbourne and Canberra. Sydney's top quartile – the top 25% of the market – has seen a median price fall of about $90,000 in the last three months. The top quartiles are made up of homes worth about $1.8m and over in Sydney, $1.1m in Melbourne, $1.4m in Brisbane, $1.2m in Adelaide and $1.3m in Perth.
In Hobart, where most home prices are still rising, the top quartile of the market has seen prices go backwards in the three months to June. Lower demand has translated to slower price growth for expensive properties in Brisbane, Adelaide and Perth. Jones said Brisbane buyers had grown pickier about top-priced properties, looking for fully renovated homes and ignoring or getting big discounts on houses that need work. "The unrenovated stuff is just sitting there and will be dropping in price quite a bit."
But buyers could not afford to be so picky over more affordable homes, she said. "That's probably happening more at the top end than it is at the bottom end [where] they'll still just take what they can get."
In mid May, the federal budget cut off access to negative gearing for investors buying existing homes. Banks responded by slashing investors' borrowing capacity by about 20%, National Australia Bank reported.