There are more first home buyers around than you think | Pete Wargent

There has been a good deal of spirited debate over recent years as to whether first homebuyers have gone missing or “on strike”.

Happy Young Couple Moving HouseOne part of the problem has been that the reported data has clearly been incomplete.

The Australian Bureau of Statistics (ABS) carried out an investigation into the situation and found that – as a handful of enlightened commentators quite rightly picked up back in 2013 – a number of lenders have only been reporting first homebuyer numbers relating to borrowers who have also received a first homeowner grant (FHOG).

There has certainly been a visible shift in first homebuyer trends, but perhaps not quite the one portrayed by the flawed ABS data.

1 – Revised loan percentages

Following its investigation the ABS released its updated figures recently.

The latest statistics showed that 14.6 percent of loans processed in November 2014 for the purchase of dwellings related to first homebuyers, with the average throughout the calendar year to date coming in at 15.2 percent.

This is clearly some way below the long run average figure of 18.8 percent.

Perhaps this is unsurprising since we do know that a significant number of first time buyers are purchasing an investment property as their first step onto the ladder.

One suspects that this is particularly the case in Sydney which has the highest entry level prices for dwellings.

The data also shows the enormous impact of the first homebuyer grant boost in 2009, which to some extent distorted the figures by “pulling forward” a sector of the market for a period of time (which has now elapsed).

2 – Number of loans processed

In terms of the number of first homebuyer loans, the volumes processed averaged ~7,850 per month through 2014 which is also some way below the long run average of ~9,600.

 

Again this probably reflects a combination of the average age of first homebuyers increasing and a number choosing investment property over a place of residence as a first step onto the ladder.

3 – State level

Finally the state level figures reveal a similar story, with a marked decline in the number of first homebuyers in New South Wales.

This accords with what we have seen on the ground in Sydney where a significant number of younger buyers are opting for an investment unit rather than enduring a long commute from the generally less favoured western suburbs of the harbour city.

In spite of this the number of loans written to first homebuyers in New South Wales actually began to rise again from December 2013, albeit moderately.

The Wrap

Overall revised figures appear to make a good deal more sense than the previous data series which suggested that first homebuyers had essentially disappeared, which they clearly had not.piggy bank house

Summarily first homebuyer numbers and percentages of loans written are some way down on their long run averages but not nearly as much as had previously been implied.

This is not altogether unexpected, since the average age of first homebuyers is generally increasing.

Moreover if those first-timers choosing investment property were to be included in the data, the figures would likely be somewhere closer still to their long run average.



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Pete Wargent

About

Pete Wargent is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. He’s achieved financial freedom at the age of 33 - as detailed in his book ‘Get a Financial Grip – A Simple Plan for Financial Freedom’. Pete now manages his investment portfolio, travels and works as a consultant in the finance industry from time to time. Visit his blog


'There are more first home buyers around than you think | Pete Wargent' have 1 comment

  1. February 8, 2015 @ 8:51 am Steve Polder

    Hi guys, do you have any articles or published comments around the “price-inflation” being experienced in the cost of residential land allotments throughout the Sydney growth corridors and the cause and effects of this on overall property prices? Why is it that the NSW state government is not addressing the chronic shortage of supply with relevant changes to planning policy encouraging expanded zoning modifications and faster approval timeframes. I note that you have explained the maladies being experienced by first home buyers in the market today – if the government really wanted to help FHBs it would release a greater volume of “crown” land within these greenfield areas and sell them at a price not controlled by the so-called “greedy” developers and then they could help these developers by reducing the exorbitent costs of development that they impose through levies, taxes, fees and charges which together actually doubles the purchase price of a block of dirt by the time it hits the market – e.g. the cost of land in the north-west sector is now running out at over $1,000 per square metre!!!. Unless they adopt the settings created by the Victorian state government during the 90s, we’ll continue to experience price inflation within this sector. Perhaps GST should be reconsidered when it comes to land purchases for FHBs and the stamp duty regime also needs a HUGE overhaul. Interested in your thoughts and commentary, cheers.

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