First home buyers returning to the market

October 19, 2017

Historically low interest rates combined with additional first home buyer incentives is helping more potential buyers get their foot onto the property ladder, new research has revealed.

According to Mortgage Choice's latest home loan approval data, first home buyers accounted for approximately 15% of all loans written in September 2017 – up from 10% in 2016.

“We haven't seen this many first home buyers in the market since July 2013, when this type of home buyer accounted for 15.4% of all home loans approvals,” Mortgage Choice chief executive officer John Flavell said.

“The latest data from the Australian Bureau of Statistics' Housing Finance report also revealed a recent uplift in home loan approvals for first home buyers. In August, first home buyers made up approximately 17.2% of the market, which is the highest level recorded since July 2013.”

Mr Flavell said low rates and the latest round of first home buyer incentives introduced by some of the states was allowing this buyer segment to achieve their property ownership goals.

“In NSW, the state government scrapped stamp duty on all homes worth up to $650,000 from 1 July 2017. In addition, the government said it would provide stamp duty concessions to those first home buyers purchasing properties worth between $650,000 and $800,000.

“Similarly, in Victoria, stamp duty was abolished for first home buyers purchasing properties worth up to $600,000, with concessions on homes worth up to $750,000. The first home owner's grant was also doubled to $20,000 in regional Victoria.

“If we look at our data on a state-based level, we can see that these initiatives have indeed boosted first home buyer activity across the aforementioned states.

“In NSW, the proportion of loans written by Mortgage Choice brokers for first home buyers rose from 2.5% in September 2016 to 12% in September 2017.

“Meanwhile, in Victoria, the proportion of loans written for first home buyers rose from 12.1% to 13.5% over the same time period.”

But while first home buyer demand has strengthened across some of the states, data from Mortgage Choice found this wasn't the case across the board.

“Over the last 12 months, we have seen a decline in first home buyer activity in Western Australia and South Australia,” Mr Flavell said.

“Of course, this doesn't come as much of a shock when you consider that the Western Australia state government cut the first home buyer grant from $15,000 to $10,000 in May.”  

Mr Flavell said while he was pleased to see an increase in the level of first home buyer activity, it was hard to predict whether or not demand from this buyer segment would remain strong over the coming months.

“There are a number of factors that affect first home buyer demand, including property prices, interest rates and government initiatives,” he said.

“As long as interest rates remain low and property price growth remains sluggish, we could see an increasing proportion of first home buyers achieving their property goals.