First home buyers disappearing by the month

by Julia Corderoy17 Oct 2014
The Australian property market is suffering from a severe lack of first home buyer participation, the recent housing finance data released by the Australian Bureau of Statistics reveals.

The results for August revealed that only 6,054 first home buyers committed to housing finance over the month which, outside of the seasonally low months of January and February, was the lowest month on month reading since June 2000.

Annually, first home buyer commitments were the lowest ever on record for a 12 month period. First home buyer mortgages accounted for 77,869 new loan commitments in the year to august 2014. 

First home buyers comprised just 11.8% of all owner occupier housing finance commitments. According to Tim Lawless, national research director at RP Data, this is another all-time low. 

“Only once previously was there a period when first home buyers comprised less than 15% of all owner occupier housing finance commitments. This was between April 2003 and June 2004 after dwelling values had increased substantially across the nation. Outside of the current cycle, the previous record low for first home buyer loans was recorded in March 2004 at 12.8%.”

The states and territories showing the most severe first home buyer trend are New South Wales, Victoria, Queensland and the Australian Capital Territory. Each of these regions is showing first home buyers to be less than 12% of all owner occupier housing finance commitments and first time buyer numbers are either at record lows or close to the record low.

Healthier first home buyer trends and conditions were recorded in South Australia, Western Australia and Tasmania, with the number of first home buyer housing finance commitments moving higher over the past few years. However, the escalating trend stalled since mid-2013 in SA and WA, but has remained relatively strong in Tasmania which is also the most affordable state for housing.

Mr Lawless said that the broad slowdown in first home buyer demand can probably be attributed to a few factors.

“Firstly, with dwelling values rising at a time when average wages aren’t rising anywhere near the same pace, affordability constraints are dampening first home buyer demand. This is particularly the case in Sydney and Melbourne where dwelling values have risen substantially,” he said.

“Another factor is the availability of First Home Buyer grants. When the First Home Buyers Grant Boost was available in 2009 we saw the number of first timers active in the housing market surge higher as this cohort of the market scrambled for the $14,000 available on an established home purchase or $21,000 for a new home. When the ‘boost’ to the First Home Buyers Grant was scaled back in October 2009 and then removed in January 2010 we saw first home buyer numbers virtually fall off a cliff.”

Lawless also said that more first time buyers aren’t purchasing a principal place of residence, but instead buying an investment property which means they aren’t counted in the Bureau of Statistics first home buyer numbers.

“For many first home buyers, the areas where they would like to live are simply too expensive for them to buy into, so they purchase an investment property while renting in an area closer to where they work and play,” he said.



  • by Jon Colley 17/10/2014 10:43:46 AM

    On the Sunshine Coast we haven't seen any significant price increase in property for some time, however we still have a reduced number of FHB in the market, and while I think the FHOG available today don't really help a new first home get into a property at all, given most lenders will not use these towards deposit funds, other changes to Mortgage Insurance conditions considerably reduce accessibility to first home buyers. I am amazed there is so much talk about increased property prices and investor activity being the cause of this, and no one mentions the inability by the majority of major lenders to fully cap LMI costs onto a 95% loan any more (most FHB require a 7 to 9% deposit now to cover MI costs). This has contributed extensively to create the reduction of first home owners in the market. The current additional hurdles for genuine savings also make it very difficult for first home owners with a sufficient deposit to obtain finance as well, not to mention certain mortgage insurers refusing to lend at all in certain regions. There are plenty of first home owners out there wanting to purchase, and I believe more should be done to assist them into the market rather than creating more difficult hurdles for them to do so. And stop blaming affordability, this issue is apparent nationally, including areas outside Sydney and Melbourne growth areas.