Young Aussies squeezed as equity rich downsizer cycle looms amid higher interest rates: ‘Rapid change’
Equity rich homeowners are taking advantage as first home buyers get squeezed by higher borrowing costs.
First home buyers looking to get into the housing market are facing tougher competition from “equity rich” downsizers as higher interest rates make life harder for young borrowers.
The segment of the market where first home buyers typically look to get on the proverbial property ladder – new apartments – is being crowded out by existing owners looking to downsize in the face of higher borrowing costs.
“We’ve never seen such a rapid change in the profile of buyers,” Mike Bird, the CEO of a major apartment listing platform, told Yahoo Finance.
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The RBA is expected to announce another interest rate hike on Tuesday. And it might not be the last for the year.
Borrowers have already been hit with three hikes since February 2026. Since that time enquiries from downsizers looking at moving into a new apartment have surged 68 per cent compared to the same period last year, according to data from Apartments.com.au.
“Between February and August this year, downsizer enquiry was 68 per cent higher than the same seven months in 2025 … First home buyer volumes have gone the other way,” Bird said.
First home buyers and investors, who are “generally more reliant on debt” are in retreat.
“What we are seeing in the new and off-the-plan apartment market is an increasingly significant shift towards the downsizer,” he said, noting that new projects being brought to market today are increasingly geared towards owner-occupiers with developers delivering larger apartments and better amenities.
“If borrowing conditions remain restrictive, or rates move higher again, the gap between debt-dependent buyers and equity-rich downsizers is likely to become even more pronounced,” Bird told Yahoo Finance.
Young Aussies ‘the most impacted’
The trend is reflected in the latest home loan data from credit bureau Equifax which shows a widening generational divide between Australian borrowers in a higher interest environment – something economists are projecting to last for some time.
Overall mortgage demand remained down more than 14 per cent year-on-year in August, but the downward trajectory seen in recent months began to ease.
“However the same can not be said in the first home buyers mortgage market, which deepened further in August at -20.1 per cent,” Kevin James from Equifax said.
“Younger Australians continue to be the most impacted amid current market conditions and cost of living constraints. Notably this is the largest year-on-year decline we’ve seen among [first home buyers] since 2022.”
