First Home Buyer numbers drop – but are still at near record levels

by Mike Wood12 Apr 2021

First Home Buyer numbers have continued to fall, according to recent numbers released by the Australian Bureau of Statistics (ABS).

First Home Buyers (FHBs) were 3.3% less of the market in February 2021 than they had been in January, though that was still over 16,000 loans written to those marking their first step onto the property ladder.

“We were expecting it this year anyway,” said Andrew Wilson, Chief Economist at Archistar.

“The worst news for First Home Buyers is higher prices, and we're certainly getting that now. FHBs numbers are still very high, in fact the February numbers were the second highest since 2009, which is the strongest period we’ve ever had for FHBs.”

“The numbers are still extraordinarily high in that sense, but they are coming off. I'd expect that to continue over the year as house prices continue to rise, and certainly house prices are going to rise in Melbourne and Sydney, as well as other capital cities.”

“It's bad news for FHBs, but for the broader owner-occupier markets, it's swings and roundabouts because you also get a bigger trade-in in the sale as your home value rises. FHBs don't have the luxury of a trade-in, so they're really restricted by higher prices to either a cut in interest rates or higher incomes. We know that income growth is very low at the moment and there's no prospect of a cut in interest rates, which are about as close to zero as they could get, so we will see few FHBs in the market.”

It isn’t just the market, however. First Home Buyers have been aided by direct intervention to get them onto the property ladder.

“The other part of the equation which has been a positive force for FHBs is government stimulus packages,” said Wilson. “We're seeing the end of that, in terms of HomeBuilder and First Home Buyer Deposit Scheme Extension. They've now finished. Also with higher prices, it means that the thresholds for stamp duty reductions and exemptions for FHBs will be harder to meet as prices are higher and there are cut-offs in a number of states.”

“It's all negative news going ahead, but we have seen a very strong period for FHBs. Not just over the last six months but also prior to that. That's because prices growth was quite benign, all through 2018, 2019 and into 2020. That was good news for FHBs as they were able to get into the market with their savings as they didn't have to play catch-up as they will be doing this year.”

“We're also starting to see more investors in the market. From a low base, but investors typically crowd out FHBs and that will be another factor that will reduce FHB numbers. Certainly though, they're still very strong and it'll be an easing of activity rather than a sharp fall.”