Sydney’s property market is seeing an unusual shift as investors and first-home buyers increasingly compete for the same pool of new and more affordable homes.
Changes to negative gearing rules are encouraging some investors to move away from established properties and focus on new builds, while first-home buyers are also being pushed toward cheaper new housing by affordability pressures and government incentives.
Investors Shift Towards New Homes
Australian Bureau of Statistics figures show investors took out a record amount of lending for newly built homes in NSW during the June quarter, with $1.53 billion flowing into the sector.
The increase comes despite a significant drop in investor activity across the established housing market.
Loan Market data also shows that demand for investment loans has risen strongly in Sydney’s outer suburbs, particularly areas with large numbers of house-and-land developments.
These include suburbs such as:
- Kellyville Ridge
- Marsden Park
- Schofields
- Box Hill
- Edmondson Park
- Cecil Hills
- Currans Hill
Negative Gearing Changes Influence Buyer Decisions
The shift has been linked to changes announced in the federal budget.
From July 2027, investors will no longer be able to claim negative gearing tax benefits when purchasing established homes. However, the tax concession will remain available for investors buying new builds.
This is encouraging some investors to consider newly constructed properties instead.
Loan Market chief executive Sam White said most investors had taken a “wait and see” approach, but some were continuing to purchase new homes because of the available tax benefits.
He expects investors to make up an increasing share of new-build lending in the future.
First-Home Buyers Face More Competition
At the same time, first-home buyers are also being pushed towards cheaper suburbs because of reduced borrowing power and affordability challenges.
Government incentives, including the $10,000 First Home Owners Grant, are also designed to encourage eligible buyers into the new-build market.
This is creating greater competition between two groups that traditionally have had different priorities.
B.Invested founder and buyer’s agent Nathan Birch described the situation as first-home buyers and investors being pushed into the same parts of the market.
First-home buyers are looking for affordable properties, while investors are increasingly seeking homes that can provide stronger rental returns to compensate for reduced tax benefits on established properties.
What This Means for Sydney’s Property Market
The result is a growing divide across Sydney’s housing market.
Affordable and new-build properties are attracting strong demand, while activity at the middle and higher ends of the market has weakened.
For first-home buyers, competition from investors could make finding an affordable new property more challenging. For investors, new developments may become increasingly attractive as tax rules change.
With these reforms not taking full effect until 2027, the competition for Sydney’s cheaper and newly built homes could continue to grow as both groups adjust their buying strategies.
