Where have all the first home buyers gone?

Despite our property markets having turned the corner and the lowest interest rates for many, many years, the fact that first home buyers (FHBs) have been sitting on the sidelines rather than buying into the market has confounded many property watchers.

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

  1. Looking back at previous cycles FHBs haven’t been as active at the beginning of the property cycle as later on unless they were induced to buy through enticements like the extra home buyers boosts they received recently. And…
  2. The incentives given to FHBs a few years ago brought forward demand and depleted the pipeline of potential FHBs.

FHB commitments down 10.6% year on year

While the number of first home buyer finance commitments rose 17.0% in May, the figures are still down -10.6% year-on-year.

first home buyer housing finance commitments

Based on finance approvals it seems that currently around 12% of property purchasers are first homebuyers, around 33% are investors and 55% are people buying their second or subsequent home.

value of finance approvals by segment

But they’re not buying new homes…

While many of the government incentives encourage FHB’s to buy a new dwelling, it seems that only 18% or so of FHB’s are buying a new home, with most choosing to buy an existing property.

In many cases they find that they can purchase a 2 or 3 year old home in the outer suburbs cheaper than they can get a new dwelling or they find an established apartment with a superior floor plan cheaper than they can buy a new apartment.


According to an interesting report by Westpac:

“ The dominant reason FHBs are missing is because of 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.”


“The Westpac-Melbourne Institute Consumer survey suggests 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.”


Is housing really unaffordable?

Housing affordability has been in the headlines again, however while first homebuyers might find it hard to believe, housing affordability conditions in Australia are among the best we’ve seen for decades.

While house prices may in general be on the up, weighing against that are lower interest rates and rising incomes which make for a better outlook for those trying to buy.

Let’s face it, it’s never been easy for FHB’s to get their foot on the property ladder, but some are making it harder for themselves by wanting the type of property today that it took their parents 30 or 40 years to afford.

Many are looking for a 3 bedroom home with all the modern appliances and a big front and back yard, while others are looking for a swish apartment in lifestyle suburbs, while their parents are likely to have had more modest expectations for the first property.


Before you call me unsympathetic to the plight of First Home Buyers…

Now don’t misunderstand me…I have 6 children in my blended family some who own their own homes, but most are still waiting to get in the property market.

[sam id=36 codes=’true’]However only last week one of my sons was offered finance and a mortgage for 95% of the value of his first property, because he’d had a credit card with a major bank for 6 months. Of course he also passed their other lending criteria.

The banks are back to lending money again and those who practice the age-old discipline of spending less than they earn, investing the balance and then reinvesting until they has a sufficient deposit will be able to join the ranks of home owners in the future.

Fact is the property cycle will move on and real estate values will increase.  While some will get on board and buy a home, others who spend money they haven’t got or keep buying the latest toys and gadgets are more likely to remain tenants.


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Michael Yardney





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

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