Ed McKnight: Are investors stopping first-time buyers from getting on the property ladder?

ANALYSIS: Investors and first-time buyers often target properties that sit slightly below the median house price.

In the first half of 2025, the median sale price of homes bought by first-time buyers was $700,000 - $80,000 less than the overall median, according to figures from Cotality and Westpac.

While there’s no good data on what investors are spending, anecdotal evidence suggests they are competing in the same market as first-time buyers. That’s because entry-level properties tend to have better rental yields.

Therefore, when a well-priced home hits the market, it’s easy to picture a first-time buyer, eager to get their foot on the ladder, going up against a seasoned investor.

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Depending on how you look at the numbers, you can argue investors are either crowding out first-time buyers … or helping them.

Here then is the evidence for both arguments.

1. Investors and first-time buyers are companions rather than competitors  

The figures indicate that when investors buy more houses, so do first-time buyers.

In the fourth quarter of 2020, as the market was booming, just over 12,000 investors bought houses. At the same time, 7458 first-time buyers got on the property ladder.

Two years later and the figures show both groups walking away from the housing market. In the last quarter of 2022, just over 5300 investors and 3608 first-time buyers made a purchase.

Why had purchases halved? Because both investors and first-time buyers respond to the same economic signals: interest rates, affordability, and market sentiment.

When the market is hot, both groups come forward and buy more properties. When the market is cold, both pull back.

It’s less of a turf war and more like a tandem bike. Both groups pedal harder when confidence is high and ease off when things cool. 

2. Investors and first-time buyers are at war with each other

You could make an entirely different argument about the relationship between investors and first-time buyers based on market share.

There is an (almost) unlimited number of properties that can be bought and sold in a year, but with market share, there is only ever 100 percentage points. It’s a zero-sum game.

Opes Partners economist Ed McKnight: "When the market is hot, both groups come forward and buy more properties. When the market is cold, both pull back." Photo / Fiona Goodall

So when investors increase their share by 2%, that’s 2% fewer purchases available to everyone else, including first-time buyers.

The same would be true if first-time buyers increased their market share. Because they tend to operate in the same price bracket, the biggest loser would be investors.

So which argument or view of the market is right? Are investors bad for first-time buyers, or are they both riding the waves of the market together? 

Well, the data is the same; it's just viewed through two different lenses. Focus on total volume, and it looks like collaboration; focus on share, and it looks like conflict.

For me, I care more about the total number of first-time buyers who purchase, not their share of the market, so I see it more as co-operation rather than all-out war.

But you could still make the argument that if investors were absent during a hot market, then more first-time buyers would be owning homes. If you believe the market is rigged, then you’ll see investors and first-time buyers as competitors.

But neither interpretation is wrong — and that’s the point.

- Ed McKnight is the economist at property investment company Opes Partners