Since late May, fewer than half of homes listed for auction each week have successfully sold, with about 40% being sold before auction day. The market downturn has seen first home buyers retreat and investor demand slump, except in new properties.
First Home Buyers Get Cold Feet
First home buyers are stepping back amid rising interest rates, ending a boom fueled by the government's 5% deposit scheme. They accounted for over 10,000 new loans monthly from October to March, according to the Australian Bureau of Statistics. Credit agency Equifax reported home loan applications in May were 10.9% lower than May 2025, with first-timer applications down 13.4%. Loan Market saw first home loan applications fall 20% in June compared to June 2025.
Property prices below the scheme's price caps—$1.5m in NSW cities, $1m in south-east Queensland, $950,000 in Melbourne and Geelong, $850,000 in Perth, $900,000 in Adelaide, and $700,000 in Hobart—began falling in June, according to Cotality data. Brisbane buyers' agent Lauren Jones noted, "This is what first-time buyers have been waiting for … and they're just not taking the opportunity." She added, "They freak out when the market's freaking out."
Expensive Property Demand Collapses
Higher-end home prices are slumping in Sydney, Melbourne, and Canberra. Sydney's top quartile saw a median price fall of about $90,000 in the last three months. In Hobart, where most prices are still rising, the top quartile has gone backwards. Jones said Brisbane buyers are pickier about top-priced properties, seeking fully renovated homes and discounting those needing work.
Investors Cutting Back
In mid-May, the federal budget cut negative gearing for investors buying existing homes. Banks reduced investors' borrowing capacity by about 20%, reported National Australia Bank. Investor loans fell by a fifth from the budget to mid-June, while owner-occupier demand held steady, Westpac said. Before the budget, investors accounted for about 40% of new home loans at major banks; by June, they fell to about 33%, according to Westpac's Carolyn McCann: "We're expecting people are sitting on their hands a bit while they understand the rules."
Investors Buying New Homes
Investors remain interested in new homes due to budget tax advantages for new dwellings. Loan Market data shows 31% more applications from such investors this June versus last June. New builds rose from 4.5% of Loan Market's 2025 total to 7% in 2026. Nick Marino, head of sales at Swooper, a land developer, said the downturn is hitting new builds but investors held steady at 20% of business: "Our transactions are very, very healthy."
Home Sales Slumping
The collapse in auction sales is a key sign of turmoil. Since late May, fewer than half of auctioned homes have sold weekly, with the rate lower in Sydney. About 40% of listed homes are sold before auction, and nearly 20% of scheduled auctions are withdrawn weekly. Total home sales in capital cities in the three months to June were 16.2% down year-on-year, said Cotality's Tim Lawless. Homes are sitting on the market longer, rising from 28 to 30 days, with advertised supply 11% higher over the year to June. Lawless noted, "Buyers now have more stock to choose from and less urgency in their decision-making."
