Lending to property investors in NSW, having ballooned from $5 billion a year to $59 billion over the past three decades, now outstrips lending to the state’s first home buyers by $40 billion.

In the mid-1990s, borrowing for investment was not much larger than by first home buyers – but since the introduction of a 50 per cent capital gains tax discount in the late 1990s, a yawning gap has opened in favour of investors.

NSW property investors borrowed $40 billion more than first home buyers during the past year. Wolter Peeters

Analysis of lending data by NSW Treasury shows that in 1994, NSW housing investors borrowed $5 billion and first home buyers borrowed $3 billion.

But the latest figures, for the year to March, show investor lending in NSW hit a new peak $59 billion while the figure for first home buyers was a third of that, at $19 billion. Lending to investors has increased by 1074 per cent since 1994, and to buyers by 546 per cent.

The investors’ figure has dwarfed the other despite extensive assistance for first time buyers from federal and state governments in the past two decades, including direct grants, stamp duty concessions, lending guarantees and shared equity schemes.

Such policies to support first home buyers have failed to prevent a decline, especially among those aged under 45.

Independent economist Saul Eslake, who researches property taxation, said lending to investors began to rise relative to first home buyers during the early 1990s when banks reduced the cost of taking out housing investment loans.

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Housing investment was then given “an almighty kick along”, he said, by the introduction of the generous CGT discount in 1999.

“The proportion of individuals \[nationally\] who were landlords rose from 14.3 per cent in 1998 to a peak of 20.8 per cent in 2014,” he said.

The NSW Treasury analysis, submitted to [a federal parliamentary inquiry](https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Operation_of_the_Capital_Gains_Tax_Discount/CapitalGainsTaxDiscount/Submissions) earlier this year, said the impact of the CGT discount “is particularly relevant for NSW, where individual taxpayers reported approximately 38 per cent of Australia’s net capital gains on average between 2018-19 to 2022-23”. That exceeds NSW’s national population share – about 31 per cent – and reflects the state’s higher property values and investor activity.

The Albanese government last month[ passed contentious legislation that introduces a less generous method for calculating capital gains taxes as well as curbing negative gearing. ](https://www.smh.com.au/politics/federal/the-caucus-cheered-albanese-s-tax-changes-but-will-voters-20260624-p609s1.html)

It says these reforms will help “level the playing field” for aspiring buyers and reduce the competition they face from investors.

Modelling by federal Treasury in the [May budget](https://budget.gov.au/index.htm) shows the negative gearing and CGT concessions will support an additional[ 75,000 first home buyers to purchase property over the next decade.](https://www.smh.com.au/politics/federal/tax-changes-will-help-75-000-young-people-get-a-home-chalmers-20260512-p5zvys.html)

The tax changes coincide with[ weaker conditions in the property market.  ](https://www.smh.com.au/politics/federal/house-values-fall-but-homes-are-not-getting-more-affordable-20260630-p60b64.html)House prices in Sydney rose by about 6 per cent last year but they have fallen 3.7 per cent since a peak in January, figures released last week by Cotality show.

# Related Article

[](https://www.smh.com.au/business/the-economy/looks-like-i-bought-at-the-peak-of-the-housing-market-but-that-s-ok-20260702-p60c24.html)

* Opinion
* [Housing affordability](https://www.smh.com.au/topic/housing-affordability-6ft3)

# [Looks like I bought at the peak of the housing market, but that’s OK](https://www.smh.com.au/business/the-economy/looks-like-i-bought-at-the-peak-of-the-housing-market-but-that-s-ok-20260702-p60c24.html)

* [Millie Muroi](https://www.smh.com.au/by/millie-muroi-p53650) Economics Writer

Buyer sentiment has been hit by the Reserve Bank’s decision to hike interest rates three times since February and [economic disruptions caused by conflict in the Middle East](https://www.smh.com.au/politics/federal/rba-boss-says-economy-can-weather-war-and-avoid-recession-20260604-p603sl.html). The government’s overhaul of capital gains tax and negative gearing has been blamed for adding to the uncertainty.

A recent report on home lending by Cotality head of research Gerard Burg predicts the government’s tax changes will curtail investor borrowing.

“The removal of negative gearing for purchases of existing properties is likely to reduce investor lending on a net basis,” it said.

How investors swamped first home buyers in NSW