Labor tax reforms have launched a mass investor exodus from the housing market while squeezing the few remaining landlord buyers into areas where they’re in direct conflict with first-home buyers.
Experts explained a turf war was emerging between investors and first-home buyers for Sydney’s scant supply of new homes and cheap housing, which was linked to budget reforms on negative gearing.
It comes as ABS figures showed investors applied for a record number of loans for newly built homes in NSW over the June quarter, resulting in a record $1.53 billion pouring into the sector.
This occurred across a backdrop of massive falls in investor demand across the established housing sector and cratering demand among all buyer types at the top and middle of the market for pricing.
Additional Loan Market data showed the biggest rise in demand for investment loans was in outer Sydney suburbs dominated by house and land packages.
They included northwest suburbs Kellyville Ridge, Marsden Park, Schofields and Box Hill, along with southwestern suburbs Edmondson Park, Cecil Hills and Currans Hill.
Investors’ shift to new builds amid lower overall purchasing activity has been linked to restrictions on negative gearing announced in the May federal budget.
Under the changes, investors will not be able to claim the tax benefits for purchases of established homes from July 2027 but will be able to get the concession if buying a new build.
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These reforms have been paired with existing state first-home buyer incentives designed to funnel first-home buyers into the new build sector, including the $10,000 First Home Owners Grant.
Loan Market chief executive Sam White said investors pulled back from established houses and the market in general, but a minority of investors were continuing to buy in the new build market.
“Some of the investors are continuing and they want the tax benefits (from building new),” Mr White said, noting that the majority of would-be investors had adopted a “wait and see” approach.
Mr White said the expectation was that investors would account for an increasing share of new build lending ahead.
B.Invested founder and buyer’s agent Nathan Birch said a similar trend has emerged in Sydney’s cheapest suburbs, where higher rental turns could offset the loss of gearing perks on established homes.
“First-home buyers and investors have been pancaked into the same markets,” he said.
“First-home buyers are buying in the cheaper areas because their borrowing power had reduced. Investors want better cash flow because they’ve lost negative gearing.
“It means the cheap-end of the market is very strong, while the top-end and middle-end of the market are falling.”
Investor Olga Ramos recently bought an investment property off-the-plan in Billbergia development Grand Residences in Chatswood and said buying new gave them flexibility under current tax settings.
“We’ve really preferred off-the-plan … it lets us stay liquid while still positioning for future growth, rather than tying up all our capital upfront on an established property.”
– With additional reporting by Kaylee Cranley
Originally published as Investors and first-home buyers forced into battle for new and cheaper Sydney homes
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