First home buyers spring back

by Miklos Bolza12 Sep 2017
The market seems to be opening back up again for first home buyers with new data indicating a greater percentage taking out a mortgage over recent months.

Non-major lender ME found that 24% of all home loan applications came from first home buyers during July and August, an increase of 17 percentage points compared to the same time last year.

The largest increases were recorded in Western Australia and Queensland where the number of first home buyers rose by 28 and 24 percentage points to 37% and 33% respectively.

“APRA regulations curbing the amount of investor and interest-only loans banks can lend have curbed investor activity. As a consequence, owner-occupiers are experiencing less competition from investors, and are benefiting from low lending rates as banks compete over a smaller marketplace,” said ME’s head of home loans, Patrick Nolan

“Since 1 July 2017, the First Home Owner Grant and stamp duty discounts have been ramped up, providing a helping hand for eligible first home buyers. This means eligible first home buyers can assemble a larger deposit, reduce their loan-to-value ratio and potentially cut out mortgage insurance.”

First home buyer customers with the bank borrowed an average of $369,000 in July and August this year – an increase of $26,000 or 8% from the same period the year before.

However a recent survey by non-bank lender State Custodians Home Loans has demonstrated the difficulties that younger Australians have despite the more positive trends uncovered by ME.

The poll of just over 1,000 people found that 29% of those aged between 18 and 34 said they would require a gift or loan from their parents to get onto the property ladder. A further 26% were waiting for some kind of inheritance to help them out.

“Whilst everyone would agree it’s a good idea for adult children to be as financially independent as possible, the reality is more and more young people are simply not able to get ahead in property without some kind of financial assistance from their parents,” said State Custodians’ general manager Joanna Pretty.

While financial support such as first home buyers’ grants and stamp duty exemptions were of help, the task of coming up with a deposit is still a challenge, she added.

“Being able to salary sacrifice for a deposit from pre-tax pay and use voluntary superannuation contributions up to $30,000 towards a deposit on a home will provide some benefit for some buyers. However, across-the-board first home buyer grants would be far more helpful as far as a lump sum goes.”

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