FHB grant changes drive home buyer confidence to lowest level since 2008: Genworth

More evidence has emerged of the damaging impact that changes to first-home buyer grants in NSW and Queensland are having on home buyer sentiment.

First-home buyer (FHB) sentiment fell 12.8% according to the latest Genworth Homebuyer Confidence Index, driving a 5.1% fall in the overall index – its lowest level since 2008.

The bi-annual index, a measure of home buyer and would-be home buyer sentiment, fell from 98.4 to 93.4 over the six-month period while the first-home buyer sub-index fell from 98.5 to 85.9.

“Changes to incentives in New South Wales and Queensland states may be affecting FHB con?dence more broadly, with New South Wales having the lowest proportion of prospective FHBs who thought now was a good time to buy a home,” the report says.

“New South Wales and Queensland both saw a large fall in the number of FHBs in the market, according to ABS data, of 56% and 66% respectively between September 2012 and January 2013.”

In addition, mortgage stress among FHBs is rising with the report finding that 41% of recent first-home buyers are expecting difficulty with mortgage repayments over the coming year – up from 18% in September 2012. 

The fall in the overall index was primarily driven by a 42% increase in the proportion of borrowers who expect to experience mortgage stress over the next 12 months rising from 18% in September 2012 to 27% in March 2013.

“The sharp rise in the proportion of surveyed FHBs experiencing and anticipating hardship follows the removal of FHB incentives on established dwellings in New SouthWales and Queensland, which went into effect in October 2012.

“Amongst FHBs in Queensland, over-commitment/borrowing was cited as the main reason for expecting mortgage stress," says the report.

Bridget Sakr, chief commercial officer of Genworth, says the changes to government grants led to a bigger drop in first-home buyer confidence compared with the overall decline in the index.

The changes to the FHB grants impacted on the ability of FHBs to purchase the properties they want, Sakr told Property Observer.

She highlighted the findings of the report that fewer than one in four FHBs wanted to buy a new home.

Despite this sharp fall in FHB confidence, time to buy a home sentiment is still higher than it was a year ago, though it too fell from 54% of FHBs to 49% as of March 2013.

“FHBs still aspire to own a home, this has increased from last year, but most want an established home in an area they want to live,” Sakr says.

“The grant removals have hindered them from being able to do that.”