First home buyers are being pushed out of the market by ugly greedy property investors

If you believed what you read in the papers you’d think that first home buyers (FHBs) are being pushed out of the market by ugly greedy property investors, many of them from overseas.

After all… currently our property markets are booming and the chart below clearly shows that first home buyers numbers (based on finance approvals) are at an all time low at a time when investors make up a significant proportion of the buyers.

number of FHB loans as percentage of total owner occupier loans 1993 to 2014

However, rather than the beginning of the end of affordability for FHBs, I see this as a temporary phenomenon.

Let me explain why…

First let’s break this down by state:

As you can see from the chart below FHB numbers are down in NSW, Victoria and Queensland where demand was pulled forward by local first home buyer grants a few years ago; but are still at normal levels in the other states where there was no such State incentive.

Remember a substantial amount of FHB demand was dragged forward due to grant incentives and concessions following the GFC.

local FHB market share

Source: Dr. Andrew Wilson, Australian Property Monitors

Now lets look at…

Where are all the investors putting their money?

Interestingly investors are putting their money into the same states where homebuyers are now catching their breath.

national investor market share

Source: Dr. Andrew Wilson, Australian Property Monitors

But according to research firm RFI many of the investors in NSW and Victoria are young and predominately middle to high income earners who are what they call ‘first home investors’.

We’re definitely finding the same trend at Metropole.

Many of our Gen Y clients are what I call “renting investors” who can’t afford to buy in the lifestyle suburbs they want to live in, despite earning good incomes. So instead they’re buying investment properties allowing them to get on the property ladder without compromising their lifestyle and they either continue to rent in lifestyle suburbs they desire or live with their parents allowing them to save more.

But (as they say) there’s more…

Age structure of the FHB population

The HIA points out that FHBs are generally concentrated within certain age groups and therefore changes in the composition of this population have a strong influence on FHB activity.

The following chart shows how the key FHB age group (aged between 25 and 35 years) has been in long term decline as a share of the population.

This is also likely that have contributed to the lower share of FHB activity in recent years.

Over the last five years, the 25 to 35 year age group’s share of the population has started to increase again and this will eventually cause the FHB segment of the market to become more active.

share of population in the 25 to 35 year age group 1993 to 2013

Add to this…

Employment worries

Over the last few years unemployment levels have been rising and stories of ongoing job losses have been consuming our headlines.

When you think about it younger employees tend to bear the brunt of weak labour markets, so it makes sense that they sit tight while they wait to see how things pan out.

What about affordability?

Interestingly contrary to what some are asserting, affordability is about as good as it’s been in a long time.

As Dr Andrew Wilson, chief economist at Fairfax, shows in the following chart, our low interest rates have meant that despite home price growth, home loan repayments have fallen over the last few years, making homes more affordable thus pushing up prices.

Falling repayments enable prices growth

While the chart below relates to Melbourne, the same applies all around Australia – rising wages and lower interest rates mean that despite higher home prices, affordability (as measured by the proportion of disposable income required to own a median price home) is up.

repayments down, prices up

In conclusion:

Sure it’s hard for first home buyers to get a foot on the property ladder. It always has been and it always will be.

In many cases it is even harder today considering the aspirations of many FHBs wanting to live in lifestyle suburbs and in the types of dwellings it took their parents 30 or 40 years to be able to afford.

However the current very low proportion of FHBs in the market is a temporary phenomenon which reflects a unique mix of factors, rather than the end of the great Australian dream of owning a home.

By the way….

If you want to take advantage of the opportunities our growing property markets will offer you now is a good time to consider your options.

If you’re looking for independent advice, no one can help you quite like the independent property investment strategists at Metropole.

Remember the multi award winning team of property investment strategists at Metropole have no properties to sell, so their advice is unbiased.

Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level.

Please click here to organise a time for a chat. Or call us on 1300 20 30 30.

When you attend our offices in Melbourne, Sydney or Brisbane you will receive a free copy of my latest 2 x DVD program Building Wealth through Property Investment in the new Economy valued at $49.



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Michael Yardney


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 one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit

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