First Home Buyers Outpacing the Market: What’s Driving the Surge?

Sure, there's been a lot of talk about the challenges being experienced by First Home Buyers (FHBs) but the latest Mortgage Insights Report by Money.com.au reveals groundbreaking trends in the September 2024 quarter, highlighting their growing influence and adaptability.

From Victoria’s record-breaking loan growth to the surge of “rentvesting,” FHBs are proving they’re anything but traditional.

Let’s explore the numbers and strategies for reshaping the market.

Victoria: the nation’s First Home Buyer hotspot

Victoria is leading the charge, recording a 14.6% annual increase in first-home buyer loans — the highest in the country.

To put that in perspective, this growth rate is over three times higher than Queensland’s 4.5%.

The state also boasts the largest share of first-home buyers, with 36% of all owner-occupier FHB loans nationwide.

So, what’s driving this surge?

According to Money.com.au’s Property Expert, Mansour Soltani, it’s all about affordability and opportunity.

He further said:

"Victoria’s property prices are significantly more accessible compared to Sydney, and the state benefits from a relatively steady housing supply.

Together, these factors make Victoria an attractive destination for first-timers entering the market."

Interestingly, the average FHB loan size in Victoria has climbed to $513,485, a modest increase from $500,313 a year ago.

This shows that while affordability remains a key factor, buyers are gradually taking on larger loans to secure their first property.

Rentvesting: the new strategy for aspiring owners

Think owning a home and living in your dream suburb are mutually exclusive?

Not anymore.

The rise of “rentvesting” is proving otherwise.

This innovative strategy involves buying an investment property in an affordable area while continuing to rent in a location that suits your lifestyle.

Money.com.au’s report shows that investor loans among FHBs grew at 21.4% annually, double the pace of owner-occupier FHB loans, which increased by 9.1%.

Mansour Soltani explains that rentvesting is becoming a popular way to balance affordability with lifestyle aspirations.

By factoring in potential rental income, first-home buyers can often borrow more and secure a foothold in the property market.

New South Wales leads the way in this trend, with nearly 1 in 10 first-home buyer loans (9.3%) being for investment purposes.

Compare that to Victoria, where fewer than 1 in 20 loans fall into this category.

This difference highlights how rentvesting aligns with the affordability challenges and lifestyle preferences unique to each state.

New South Wales: the double-edged sword

While NSW recorded the second-highest annual growth in FHB loans at 10.9%, the state remains the most challenging market for first-home buyers.

Sydney’s astronomical property prices push the average FHB loan size to $621,000 — the highest in Australia and a staggering 34% above Western Australia’s $462,000.

This affordability gap highlights why rentvesting is particularly appealing in NSW.

With FHB investor loans growing at an impressive 31.3% annually, more first-timers are turning to this strategy to navigate the high entry costs.

Yet, even with creative strategies, NSW remains a tough market for those looking to transition from renters to owners.

Other key market trends from the report

• National FHB Loan Growth: FHB loans grew three times faster than other owner-occupier loans, increasing by 9.1% annually compared to 3% for non-FHB loans.
• Average Loan Size: Across Australia, the average annual loan size for first-home buyers surpassed $525,000 for the first time, up 6.4% year-on-year. While still below the $598,000 average for non-FHB loans, this gap underscores the financial challenges first-time buyers face.
• State-by-State Breakdown:
  • Queensland: Fastest quarterly growth at 4.2%, reflecting a strong short-term uptick.
  • South Australia: Solid annual growth of 8%, showing steady progress.
  • Western Australia: Lowest average FHB loan size, offering affordability for buyers.

What does this mean for you?

The report illustrates how first-home buyers are adapting to the complexities of Australia’s property market.

Strategies like rentvesting and choosing affordable markets such as Victoria are reshaping how and where FHBs are entering the market.

Despite rising property prices, the resilience and ingenuity of this group are clear.

As Mansour Soltani aptly puts it:

“There’s a balance of affordability and opportunity in Victoria which makes it an appealing destination for first-time buyers entering the property market.”

Meanwhile, rentvesting is offering a lifeline for those in pricier states like NSW, proving there are always creative solutions to property challenges.

About Leanne Spring Leanne is a highly experienced Buyers Agent in the Brisbane Real Estate market. Leanne became a passionate lover of property in 2001. Since then, both professionally and personally, she has been involved in all aspects of property including purchasing, negotiating, renovating, and selling.