Are First Home buyers a dying breed?

Higher interest rates and tighter lending practices are stopping first home buyers from stepping onto the property ladder.

According to new research by Loan Market group, enquiries from first home buyers to the brokerage fell 15 per cent in the last six months of 2010.

Loan Market chief operating officer Dean Rushton said monthly enquiries from first home buyers had dropped to 30 per cent of all enquiries received in December 2009, compared to 45 per cent in June last year.

“If this trend continues first time buyers are at risk of becoming a secondary market,” Mr Rushton was reported as saying in Real Estate Business 

“This is a far cry from 2009 when first time buyers dominated the home finance market due to boosted government incentives and interest rates at near 50 year lows.

“But a combination of factors such as four interest rate rises last year by the Reserve Bank of Australia and the prospect of more this year is squeezing these people out of the market.”

Mr Rushton said the federal government’s $1.2 billion First Home Saver Accounts (FHSA) scheme had done little to encourage more first time buyers into the market.

What does this mean for you as a property investor?

 Well… some Gen Y’s will stay at home with their parents while they save up their deposits.

But others will fly the coup and if they can’t afford to buy a property they will rent. And in general most will want to live in the same areas – lifestyle locations near where they work and play. This means demand for rental accommodation in the inner suburbs of our major capital cities (not the CBD – but inner ring suburbs) will increase.

With little new development in these regions investors are likely to enjoy strong rental growth.

This trend also means that there will be less demand for house and land packages in the new suburbs on the fringes of our cities, but these never made good property investments anyway.


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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit

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