There has been a dramatic fall in the number of property buyers receiving the New South Wales first home buyers grant.

About 7,800 first home buyers received the $15,000 grant last year, compared to 36,600 in 2011.

Analysts say the fall can be attributed to changes to the scheme and increasing competition from foreign buyers.

Changes made in 2012 mean first home buyers are only eligible for the grant if the home they buy is new and under $650,000.

Sahar Mehpour spent five months looking to buy a new home to qualify for the first home buyers grant but says properties on the market were too expensive and inconveniently located.

"I found it a very frustrating experience and it was quite nerve-wracking as well," she said.

"It is becoming increasingly out of reach for most people to purchase a new property as a first home buyer."

Ms Mehpour gave up and bought an established home instead, missing out on the grant.

First home buyer 'prospects aren't really good': analyst

Mortgage broker Craig McDonald says the scheme is much less popular than it once was.

"There's not a lot of new stock on the market within a 20 kilometre radius of the CBD," he said.

"I used to do two or three applications per week for first home buyers... and I would process their grants.

"But now I've done one in the last three months."

Under federal laws, foreign investors are only allowed to buy new homes in Australia, meaning they are going head to head with local buyers who are trying to take advantage of the grant.

The demand is sending prices even higher and analysts say many of the suburbs with the biggest price gains are in areas popular with buyers in Asia.

"Those areas are close to the CBD moving down towards Mascot areas such as Ultimo and Alexandria," he said.

"It's really a desert out there for first home buyers... at the moment and the prospects really aren't good going forward."

The State Government says there are no plans to change the first home buyers scheme.