Where have all the first home buyers gone?

Despite our property markets turning the corner and the lowest interest rates for many, many years that fact that first home buyers (FHBs) have been siting on the sidelines has confounded many property watchers.

It hasn’t surprised me for a number of reasons…

  1. Firstly in past cycles FHBs haven’t been as active at the beginning of the property cycle unless they are induced to buy through incentives like they received after the GFC. And..
  2. Incentives given to FHBs a few years ago brought forward demand and depleted the pipeline of potential FHBs.

According to an interesting report by Westpac:

First home buyers have not engaged in the current housing recovery, particularly in NSW, Vic and Qld where activity in the segment is at very weak levels.

[sam id=38 codes=’true’] The dominant driver appears to be the ‘shadow effect’ of earlier pull-forwards in activity associated with changes in government assistance. Although these were not as large as the 2009-10 pull-forward they have effectively depleted the pipeline of potential FHBs which could take over a year to rebuild.

Detail from the Westpac-Melbourne Institute Consumer survey suggest buyer perceptions have also been a restraining factor, most likely relating to affordability issues. Overly conservative assumptions around mortgage interest rates may be muting the response to what is otherwise a reasonably positive picture on affordability.

The ‘shadow effect’ on FHB demand in NSW, Vic and Qld is likely to last well into 2014. Beyond this weak period, prospects for FHB activity will depend on how much positive demographic drivers are undermined by affordability issues and lacklustre economic conditions.

 

As you can see from the following graph;

 

WestpacFHBFinance………………………………………………………….

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Michael is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He's been once agin been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'Where have all the first home buyers gone?' have 1 comment

  1. October 1, 2013 @ 8:46 pm Troy

    My wife and I have been saving for the past four years for a first home. Due to the restrictions of the First Home Saver Account we could not access the funds to take advantage of the government incentives when they were available. The accounts now qualifity and are accessable but due to the recent market activity in Sydney we are getting pushed further and further west. We’re pleased to be in a position to purchase our first property but fear it will diminish our ability to achieve our ultimate plan for the next 10 years. I sat through the property update seminar in Sydney recently and felt quite depressed as my thoughts about the market were being confirmed by the presenters. First Home Buyers in NSW don’t have a leg to stand on in the current market with no assistance and investor activity. Despite this we will be buying something soon and do the best we can to purchase at a fair market price with the ability to add value down the track.

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