The latest data from the Australian Bureau of Statistics showed that the value of home loans taken out by established property owners in the first five months of 2016 reached the highest level above first home buyer loans in nearly 16 years, effectively pricing the latter out of the property market.

The gap grew to as much as 11.65 per cent in January, the highest difference since August 2000’s 11.74 per cent. By May, the loan being given to first home buyers averaged at $326,400, compared to the average non-first home buyer loan at $362,300.

“Generally, non-first home buyers are in a stronger position to service a mortgage, which could mean they qualify for finance more easily,” said Bessie Hassan, money expert at “As a result, this creates greater competition within the property market, which could mean that first home buyers are being squeezed out of the market as they try to compete with cashed-up non-first home buyers.”

According to economist Saul Eslake, investor buyers remain to be the first home buyer’s biggest competitor, as they are more likely to be interested in the same properties.

“They are being squeezed out by investors, who get their interest bill subsidised through negative gearing and who usually have the capacity to put down bigger deposits, as in most cases they already have a property they can use as security,” he said. “I think in the absence of any policy measures designed to remove some of the pull factors for investors, first home buyers will continue to get squeezed out.”

However, Hassan believes there is still hope for the first home buyer. “In a low interest rate landscape, it’s likely that more first home buyers may take out larger loans as the cost of borrowing power becomes cheaper.”

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