Geelong’s Armstrong Creek growth area is a target for first-time buyers. Picture: Alan Barber
Victorian first-home buyer demand has plunged by a third since the year before Anthony Albanese became prime minister, despite support schemes intended to help them.
Equifax analysis shows new mortgage demand among first-home buyers in Victoria fell 33.34 per cent between May 2021 and May 2026, the steepest fall of any state.
Their share of demand also dropped from 41 per cent to 31.9 per cent.
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The fall has come despite expansions to federal and state support measures for aspiring buyers, including low-deposit schemes and stamp duty concessions designed to help purchasers get into the market sooner.
Equifax’s first-home buyer mortgage inquiry data also shows buyers still in the hunt are asking lenders for bigger loans, with the average Victorian inquiry rising from $601,644 in May 2021 to $685,455 in May 2026.
Equifax chief solutions officer Kevin James said demand for first-home buyer loans had dropped significantly after years of home price growth outpacing wages.
“Prices have outgrown income,” Mr James said.
Equifax chief solutions officer Kevin James said first-time buyers are facing a tougher lending environment.
“The amount first-home buyers have to pay has often increased by more than 35 per cent, but their incomes have not grown by anything close to that.”
Mr James said the challenge had been made worse by a tougher lending environment, including Australian Prudential Regulation Authority guardrails that made it harder for banks to issue loans to buyers borrowing more than six times their annual income.
“In the past, people had to borrow well above six times their income to get into the market, so the change really restricts what a lot of first-home buyers can purchase,” he said.
Mr James said first-home buyer activity was likely to remain under pressure as buyers weighed up falling home prices, lower auction clearance rates and uncertainty about interest rates.
“First-home buyers are seeing clearance rates go lower, they are seeing home prices move backwards, so they are holding off,” he said.
The three-bedroom house at 35 Willesden Drive, Waurn Ponds, is listed for sale with price hopes from $660,000 to $725,000.
“There is also scepticism about interest rates. Many first-home buyers have to decide, do you apply for a loan now, knowing rates could go up, or wait to see what will happen.
“Most are waiting.”
Mr James said a lot of mortgage demand in Victoria is homeowners refinancing to get cheaper loans.
Separate State Revenue Office data shows the remaining first-home buyer activity is heavily concentrated in Melbourne’s outer-suburban growth corridors.
Australian Bureau of Statistics data shows a recent slowly rising trend in lending to first-home buyers in Victoria.
Regional buyers are also running into affordability limits, with PropTrack data for June 2026 showing the Geelong region’s median house price was $750,000, exactly Victoria’s upper cut-off for first-home buyer stamp duty concessions.
The three-bedroom house at 83 Settlement Rd, Belmont, is listed for sale with price hopes from $639,000 to $689,000.
Anecdotally, first-time buyers have been seen as one the most active groups in the Geelong market, with properties priced between $600,000 and $800,000 seeing the biggest demand.
Mr James said there was clear demand from first-home buyers moving to regional areas.
“In 2021 first-home buyers showed they were prepared to move to regional areas,” he said.
“Covid hit and we became a work from home society. It’s still happening, there is still a migration from the CBD.
“In more recent times, demand for mortgages in regional areas has been skewered by rentvesters who are renting in larger cities while buying in (the regions).
“These are often people who can’t afford a first-home where they live so they have to try other ways of getting into the market.”
Bisinella Developments managing director Richard Bisinella said lifestyle, connectivity and long-term opportunity continues to drive strong demand for people buying in Geelong.
“Geelong offers space, community and relative affordability, while still providing access to jobs, education and major infrastructure,” he said.
Richard Bisinella said a shift of homebuyers to Geelong reinforces the importance of maintaining future housing supply. Picture: Alan Barber
“These key aspects are becoming increasingly difficult to find in capital cities, which is driving a gradual shift towards regional living for Australians.”
But that demand reinforces the importance of maintaining housing supply to meet the needs of a growing population, he said.
“The challenge for our industry and for government is ensuring there is enough well-located, development-ready land available to support that growth.”
He said demand remained particularly strong among families and owner-occupiers seeking access to schools, transport, work and essential services.
“We’re seeing buyers prioritise liveability just as much as value,” Mr Bisinella said.
PropTrack senior economist Anne Flaherty said price remained the biggest challenge facing Victorian first-home buyers.
PropTrack senior economist Anne Flaherty said price is the biggest challenge facing first-home buyers.
“The number one thing of all comes down to the price at which properties are selling,” Ms Flaherty said.
“They’re looking in more affordable suburbs, which might be a little bit further away from where they live, or it might be a smaller dwelling size.
“The compromises have had to get bigger over time for first-home buyers.
“A lot of middle-ring and established suburbs, the prospect of purchasing a house is just out of the question for a lot of first-home buyers.”
Ms Flaherty said support schemes could help buyers enter the market sooner, but could also inflate prices beneath eligibility caps.
She said price falls alone would not solve the affordability squeeze.
“It has to be supply,” she said.
“Where we underbuild, prices rise more rapidly, and where we overbuild, prices hold pretty much steady or even decline.”
with Peter Farago
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