Big changes needed to lure first home buyers back

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The efforts of the RBA to stimulate the home finance sector in 2012 appear to be having a mixed effect on home loan approvals dependant on state-based incentives being added and removed during the year, according to two industy spokespeople.

Australian Bureau of Statistics (ABS) figures for November 2012 showed only a small increase of 0.6% since November 2011, despite the RBA cutting interest rates five times and 1.75% in the same time-period.

Loan Market corporate spokesman, Paul Smith, says NSW showed the most significant swing in activity by dropping 11% in home loan approvals from November 2012, compared to November 2011, and Victoria and Queensland showed improvements of 6% and 8% in the same time period.

“Late last year, NSW market demands were pulled forward by the removal of stamp duty concessions. The interesting consideration here is that it appears that the removal of this government concession had a far greater influence than five interest rate reductions.”

Fellow aggregator AFG’s Mortgage Index figures for December show that the mortgage market is becoming ‘a tale of two seaboards’ with investors, rathe than first home buyers, dominating the NSW and QLD markets.

AFG says home loans for investors comprised 46.3% and 35.9% of all home loans arranged in the two states respectively, due to the fact that the average long-term share of home loans arranged for first home buyers, usually between 12% - 15%, collapsed to just 4.2% in NSW and 4.5% in Queensland during the last two months of 2012, following the withdrawl of first home buyers grants in both states (except for new housing).

Smith says the market in Victoria has been benefiting from the government increasing stamp duty deductions each year and that the extra 10% to be saved for first home buyer purchases after January 2013 was holding back ‘savvy’ buyers looking for extra savings.

"The Victorian market picked up its pace in early 2012 and is now showing signs of slowing down in anticipation of an incentive in the form of stamp duty concessions.”

Smith says that while further interest rate cuts would continue to entice potential buyers, he believes that each state is dealing with unique circumstances that will continue to dampen or accelerate home buyers’ intentions.

“While it’s obvious there are always a wider range of considerations the RBA has for adjusting interest rates, if the government is looking to stimulate the housing market, there is clear evidence that the addition and removal of purchasing incentives has immediate influence on buyers.”

However, AFG’s general manager of sales and operations, Mark Hewitt, says that's not the only thing that needs to change.

“As we enter a new year, the mortgage market is in need of two dynamics: more competition and greater consumer confidence. It is still the case that just four institutions account for nearly nine out of every ten mortgages arranged in Australia. That level of concentration doesn’t serve consumers well. It’s also pretty well established that despite strong employment levels, low interest rates and greater savings, many people simply don’t feel sufficiently confident in our economy to buy their first home, upgrade or invest. This is particularly the case for first time buyers of established housing and more needs to be done to encourage younger people into buying their first home.’

  • Country Broker on 16/01/2013 9:32:25 AM

    The way to lure first home buyers back is to bring in a genuine FHOG constructiion bonus !! It is revenue neutral any way as the GST on the construction contract and tax on builders profits more than fund it .
    No use hiding behind surplus revenue projections it needs to be recognised construction of homes needs stimulating NOW. The State goverement efforts are NOT working.

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