First-home buyers left out as residential market improves: Evgeniya Hawthorne

The Australian residential property market has recently been showing signs of improvement.

Investors and changeover buyers are being drawn back to the market following interest rate cuts and the positive outlook for housing.

Unfortunately, first-home buyers are missing out on the favourable environment due to  a number of reasons – stamp duty, the size of deposit required and ability to save for it, unemployment and underemployment concerns.

Recent changes to the first-home owner grant in all states and territories (except for Western Australia and the Northern Territory) have added to the uncertainty and impacted on the activity of first-home buyers in the market.

As part of the inter-governmental agreement (IGA) on the reform of Commonwealth/States financial relations signed in June 1999, all states and territories agreed to provide uniform financial assistance to Australians who are buying their new or established first-home through the introduction of the first-home Owner Grant.

According to the recently released QBE Lenders’ Mortgage Insurance’s (QBE LMI) 2013 Mortgage Barometer Report, 84% of first-home buyers believe property prices are close to reaching or are above what they can afford and 69% worry they will neverbe able to afford their own home (compared to 24% of all respondents).

Unfortunately, governments of most states and territories have made it much harder for first-home buyers to see their dreams realised. Table 1 (below) shows recent changes to the first-home owner grant.

As a result of the new policies, the Australian Bureau of Statistics’ figures for March 2013 show that first-home buyers are becoming an endangered species. 

Figure 1 (below) shows that in Australia, only14.2% of owner-occupier housing finance commitments in March were from first-home buyers – the lowest level seen since May 2004.

Housing finance figures for April show that in New South Wales and Queensland (both below), where the grant ended in Octobe rlast year, first-home buyers made uponly 7.3% and 10.3% of the owner occupier market respectively with both states significantly decreasing their share in the total number of first-home buyers in Australia.

Two out of three first-home buyers in NSW and Queensland surveyed by the QBE LMI’s indicated the new policies made an impact on their purchase intentions.

With new arrangements aiming to stimulate building activity, it is too early to expect substantial positive results on the industry. REIA has been lobbying hard against the breach o fthe IGA, however we are still to hear what the Commonwealth will do.

Evgeniya Hawthorne is Research Officer for the Real Estate Institute of Australia.