First-home buyer loans are on the rise, but not in the way one might expect. Despite the government's efforts to stimulate the market with billions in controversial buyer stimulus packages, first-time buyer activity has plummeted over the past five years. What's more, the average loan size has ballooned by over $100,000 in multiple states, while demand for first-home loans has dropped by a third in major states. This trend is particularly striking given that interest rates were at record lows just a year before the current government took office, and income levels were similar, meaning buyers' borrowing power was much higher five years ago. So, what's going on?
In my opinion, the government's 5% deposit scheme has had mixed results. While it has likely pulled in more higher-income buyers who didn't have much in savings, it has done little to stimulate lower-income groups. This approach has also left users more vulnerable, as the scheme has increased the amount of debt held by first-home buyers and raised the risk that some will fall into negative equity if prices fall further. Personally, I think the government should focus on promoting housing supply instead of just providing incentives for first-time buyers. After all, what good is it if buyers can't actually afford the homes they're being encouraged to buy?
One thing that immediately stands out is the dramatic drop in first-home buyer participation in Western Australia, from nearly half of sales in May 2021 to just 28.7% in May 2026. This trend is not unique to WA, as first-home buyers accounted for 41% of NSW loan inquiries in 2021 but were behind only 29% of mortgage demand in 2026. What this really suggests is that the government's efforts have not been enough to keep up with the rising cost of housing. If we take a step back and think about it, it's clear that the amount first-home buyers have to pay has increased significantly, while salaries haven't kept up with that.
What many people don't realize is that the government's approach has been one-sided. While the 5% deposit scheme helps first-home buyers enter the market with lower deposits, it doesn't address the issue of affordability. As Equifax analyst Kevin James pointed out, home prices would still have to fall dramatically from current levels for housing affordability to improve enough to drive a substantial rise in first-home buyer numbers. In my view, this highlights the need for a more comprehensive approach to addressing housing affordability, one that goes beyond just providing incentives for first-time buyers.
A detail that I find especially interesting is the notable rise in debt among 18-25 year olds, who had an average $162,000 more debt than in 2026. This trend is concerning, as it suggests that young people are being pushed into significant debt at a time when they are just starting their careers and building their financial stability. From my perspective, this raises a deeper question about the role of government in supporting young people's financial well-being, and the need for a more holistic approach to addressing housing affordability.
In conclusion, the surge in first-home buyer loans is a complex issue that requires a nuanced understanding of the market dynamics at play. While the government's efforts to stimulate the market have had some positive results, they have not been enough to keep up with the rising cost of housing. As such, I believe that a more comprehensive approach is needed to address housing affordability, one that goes beyond just providing incentives for first-time buyers and addresses the underlying issues of supply and affordability.
