Exodus of first time homebuyers leading to finance falls
By
Luke Cornish
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11/03/2010 5:30:00 AM
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The number of owner-occupied housing finance commitments fell by 7.9% in January as first homebuyers refuse to enter the market without generous government subsidies. The proportion of first homebuyers seeking approvals fell to 20.5% – the lowest since October 2008.
This is the third straight month that home lending for both new and existing dwellings has fallen. Housing Industry Association economist Ben Phillips said this shows that claims of a property bubble are inaccurate.
“The removal of the federal government’s first home buyer boost and increasing interest rates have clearly lowered activity in both the new and existing homes market,” Phillips said. “The Reserve Bank must take stock of the impact that higher interest rates are having on the new homes market.”
ANZ economist David Cannington said that first homebuyers are down almost 45% since October due to the increasing interest rates and the withdrawal of the government grant.
“This retreat is expected to continue for some months yet with continued interest rate hikes further eroding housing affordability,” Cannington said, adding that it’s not just first time buyers who are being scared out of the market by the tightening interest rates with the number of borrowers looking to upgrade falling by 6.9%.
“However, investors continue to find value in the market, posting another 0.9% gain in the month to be up 21.8% year-on-year,” Cannington said.
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