Money’s Mortgage Insights for first home buyers: VIC is a first home buyer hotspot & ‘rentvesting’ is on the rise in Australia

22 January 2025

First home buyer loan growth outpaces other borrower types, growing three times as fast annually
First home buyer (FHB) loan numbers are growing three times faster than other (non-FHB) owner occupier loan types — up 9.1% compared to 3% for other loans.

The majority of FHB loans are for owner occupiers (homebuyers), accounting for 93.2% of all FHB loans. In contrast, only 6.8% of FHB loans are for investors, although this segment is growing as more Australians consider investing for their first property purchase.

The average annual loan size for first home buyers across Australia has exceeded $525,000 for the first time, rising 1.6% during the September 2024 quarter and 6.4% annually. It remains lower than the average annual loan size for non-first home buyers, which stands at $598,000.

Victoria is the nation’s hotspot for first home buyers
Victoria leads the nation with the strongest annual growth in first home buyer loan numbers, recording a 14.6% increase — more than three times higher than Queensland’s growth rate of 4.5%. New South Wales came second with a 10.9% annual growth rate, followed by South Australia at 8%. This is for owner occupied loans only.

Additionally, Victoria holds the largest share of first home buyers among all states, accounting for 36% of all FHB owner occupier loans.

Money.com.au’s Property Expert, Mansour Soltani, says Victoria is experiencing strong momentum in first home buyer activity.

“Victoria’s surge in first home buyer loans is driven by a combination of factors, including more affordable property prices compared to New South Wales, particularly Sydney, and a relatively steady housing supply compared to other states. There’s a balance of affordability and opportunity in Victoria which makes it an appealing destination for first-time buyers entering the property market,” he says.

The average annual FHB loan size in Victoria is $513,485, up from $500,313 a year ago.

However, in the September quarter alone, Queensland recorded the strongest growth in FHB loans, with a 4.2% increase. Victoria followed as the second-fastest, with growth of 2.5%.

‘Rentvesting’ on the rise: Investor loans surge among first home buyers
Investor loans in the first home buyer segment grew at twice the pace of owner occupier loans annually, rising 21.4% compared to a 9.1% increase for owner occupier FHB loans.

Mansour says this may be indicative of ‘rentvesting’ becoming a more common buying strategy.

“First home buyers are increasingly entering the property market as investors while continuing to rent in suburbs where they prefer to live. It’s a strategic approach to balancing affordability and lifestyle, as they may be able to borrow more as investors by factoring in potential rental income,” he says.

The trend is most prominent in New South Wales, where nearly 1 in 10 first home buyer loans (9.3%) are for investment purposes. In contrast, it’s least common in Victoria, where fewer than 1 in 20 loans fall into this category. This aligns with Victoria’s broader trend of being dominated by owner occupier loans, with a smaller share of the market catering to investors.

It’s worth noting that with 9,809 loans annually, the investor segment within first home buyer loans is relatively small.

New South Wales is a tough market for first home buyers
While FHB loan numbers in New South Wales recorded the second-largest annual increase at 10.9%, the state remains a challenging market for first home buyers due to high property prices, primarily driven by Sydney.

New South Wales has the highest average annual FHB loan size at $621,000 — 34% higher than Western Australia, which has the lowest average annual FHB loan size at
$462,000.

Additionally, the gap between the average loan size for first home buyers and non-first home buyers in NSW stands at 19%, compared to 11% in other states.

However, first home buyer (FHB) investor loans in NSW are growing at 31.3% annually — the fastest rate of any state, suggesting that more first home buyers in NSW are adopting ‘rentvesting’ as a strategy to enter the property market.