Report shows dramatic shift in first home buyer behaviour

by Madison Utley24 Sep 2019

A recently published survey has illuminated how the dramatic movements in housing values over the past five years have reshaped the Australian first home buyer (FHB) market.

The Genworth FHB Sentiment Report, conducted in June and July across 2,000 prospective FHBs and 1,000 recent FHBs, showed that rather than pursuing the traditional Australian dream of owning a property for a lifetime, survey participants have “a more pragmatic approach” to enter the market  with an “entry level” property and upgrade down the road.   

Around one in three (32.3%) prospective FHBs plan to sell their first property within five years, with the trend even more pronounced in Sydney (39.5%) and Melbourne (36.3%).

As a result, free-standing homes are being overtaken by small apartments as the most popular property type among FHBs, with investment properties also becoming more prevalent among those looking to enter the market. One in six prospective FHBs plan to buy an investment property as their first property purchase, as compared to one in ten among the recent FHB respondents.

In order to capitalise on the opportunity seen in the current market, around 60% of prospective FHBs plan to buy now with less than a 20% deposit as compared to the 47.4% of recent FHBs who bought their first property with less than a 20% deposit.

To bridge the gap, 75.1% of prospective FHBs plan to apply for the government’s First Home Loan Deposit Scheme, 27.5% expect to ask their family for assistance and 15.8% plan to use lenders mortgage insurance (LMI).

Of the recent FHBs, around 70% reported they did not fund 100% of their deposit from their own savings, with the majority (56.9%) relying on family assistance and 35.6% utilising LMI.

“Dynamic market conditions are resulting in changing first home buyer behaviour and needs,” said Genworth CEO and MD Georgette Nicholas.

“To address the increasing demand for ‘entry level’ first homes which are held for less than five years, we recently announced a new monthly premium LMI offering in addition to our current single upfront premium product.

“This offering provides borrowers with the option…to pay the LMI premium in instalments over time, which means a greater portion of their loan can be utilised to support the purchase of their first home.”

The new monthly premium LMI also gives borrowers the flexibility to refinance at a later date without the need for a refund of LMI premium.

“As first home buyer needs continue to evolve, it is important that a range of stakeholders – both public and private – work together to develop solutions that complement each other and continue to support the Australian dream of home ownership,” said Nicholas.