Where are all the first home buyers?

Throughout 2012, the total number of first home buyer finance commitments increased by 4.9% from 2011 however, with incentives across most states and lower mortgage rates the bounce has been much lower than expected.

Throughout 2012, there were 97,672 housing finance commitments by first time buyers.

Although the number of commitments was up by 4.9% compared to 2011 volumes, when you consider standard variable mortgage rates were 85 basis points lower in December 2012 than they were in December 2011 it is a fairly disappointing result.

Between 2000 and 2012, there has been an average of 117,686 housing finance commitments to first home buyers each year. Based on these figures, housing finance activity by first time buyers was -17.0% below the average, further highlighting the limited activity by this purchaser type throughout 2012.

First home buyer activity peaked throughout 2009 with 187,674 commitments over the year. In comparison to the record level of activity, first home buyer finance commitments in 2012 were -48% lower.

On a month-to month basis throughout 2012, first home buyer finance commitments were strongest in October (9,215), May (9,110) and August (8,921).

It is important to note that in October, standard variable mortgage rates were reduced by an average of 20 basis points and in May they fell by an average of 35 basis points.

Clearly the falls in variable mortgage rates over these months resulted in an increase in activity by first home buyers.

On the other hand, you can note that first home buyer activity tapered off significantly over the final two months of the year, this was despite a further cut to mortgage rates in November. Changes to stamp duty rates and first home buyer concessions, particularly if they buy or build a new property may have also had an impact on the results over the year.

First home buyer commitments accounted for only a marginal proportion of total housing finance commitments throughout 2012.

Over the year there were a total of 546,765 housing finance commitments to owner occupiers, 97,672 of which were to first home buyers, equating to 17.9% of all owner occupier commitments. The figure had also increased over the year, albeit by just 0.1 percentage point from 17.8% in 2011.

The limited rebound in first home buyer housing finance commitments is quite disappointing when you consider the overall housing market conditions throughout 2012. Capital city home values fell by -0.4% throughout the year and as at the end of the year, values were -5.7% lower than at their October 2010 peak.

Standard variable mortgage rates were much more accommodating throughout the year, falling from 7.3% in January 2012 to 6.45% in December 2012. Interest rates have fallen by 135 basis points from October 2011 which has clearly made servicing the debt on a mortgage much more affordable. These factors are outside of the incentives in place for first home buyers at a national level and those available across certain states and territories. Despite these factors, the pick-up in first home buyer finance commitments has been limited and volumes remain well below average.

Across individual states, the number of first home buyer finance commitments has been quite varied.

Throughout 2012, the number of first home buyer finance commitments were lower than those in 2011 in New South Wales (-26.5%) and Tasmania (-0.4%). In every other state, commitments were higher than in 2012, with the largest increases in Northern Territory (37.2%), Western Australia (34.2%) and Queensland (20.0%).

In comparison to the annual average number of commitments between 2000 and 2012, each state except for Western Australia (11.8%) had a below average number of first home buyer commitments in 2012.

The largest differences from the average were recorded in Tasmania (-36.3%), Sydney (-34.6%) and South Australia (-24.4%).

Given the fact that the impact of cuts to mortgage rates take some time to filter through to the market, we would expect that first home buyer finance commitments will be stronger throughout 2013 than 2012.

The delayed impact of cuts to mortgage rates is highlighted by a slightly greater number of first home buyer commitments through the second half of the year (49,765) than the first (47,907). With home values also having risen over the second half of 2012 and the prospect of further mortgage rate cuts in 2013, these conditions bode well for a further increase in first home buyer activity.

To what extent first home buyer activity increases remains to be seen however, we anticipate that any further increase is likely to be fairly moderate.


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Tim Lawless


Tim heads up the Core Logic RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia. Visit www.corelogic.com.au

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