First-Home Buyers vs. Investors in the Property Market Hotspotting

Media loves the storyline that first-home buyers are competing with wealthy investors for properties – and losing because investors apparently have a huge advantage.
Like so much that’s written and spoken in news media about the housing market, it’s a work of fiction. The polar opposite is, in fact, the truth.
The biggest competition for first-home buyers in the market is not investors, but home buyers other than first-time buyers.
The largest cohort in the market, at any point in time, is home buyers who already own a home, have equity in that home and are upgrading – or, in some cases, down-sizing.
These are buyers who are older, with equity, higher incomes and borrowing power – and they can easily over-power a young novice in the market.
The biggest problem for first-home buyers is not investors, it’s the incredibly high costs of getting into the market because of the policies, decisions and actions by politicians and bureaucrats.
Just take a look at the cost of a house-and-land package anywhere in Australia. Given that the cost of constructing the average brick-and-tile house is now close to half a million dollars, not including the land cost, it’s hard to find a new home in a housing estate for under $700,000. It’s considerably more in the biggest cities.
The greatest lie of all is that investors have a big advantage over first-home buyers in the market. Presumably media says that because of their persistent misunderstanding about negative gearing.
The reality is quite the opposite. If it comes down to a competition between a first-home buyer and an investor, the first-home buyer has several big factors in their favour.
First-home buyers have high levels of government assistance, whereas investors do not. Quite the opposite, investors increasingly face major impediments from government.
First-home buyers are granted stamp duty concessions, so they have to pay little or nothing compared to the massive tax imposed on investor buyers.
Investors are slugged with much higher interest rates by lenders, so that if you have a first-home buyer and an investor of similar ages and incomes, the first-home buyer has considerably greater borrowing power and therefore has a competitive advantage over the investor who earns the same income.
Keep in mind that, according to the latest research data, most investors are young, on average incomes and need to buy as affordably as possible, which means they cannot pay high prices for properties in competition with other buyers.
Investors have several other disadvantages compared to home buyers. 
As well as paying higher interest rates, they pay higher council rates and they pay higher rates of insurance. And they have to pay taxes that home buyers do NOT have to pay, including land tax and capital gains tax.
The only potential positive on the investor side of the equation is negative gearing, which in some cases, but certainly NOT ALL, may reduce the amount of tax the investor pays – but that does nothing to increase the investor’s borrowing capacity or ability to pay a high price for a property.
The whole narrative around first-home buyers being priced out of the market by so-called wealthy investors is a lie.
And indeed, the latest official data on lending to buy property shows that there has been a 13% increase in first-home buyer activity this year, compared to the same time last year.