First-home buyer activity increases

Stock image.
Stock image.

FIRST-HOME buyers are taking advantage of WA’s ongoing low prices, reduced interest rates and other incentives, with activity higher than the 10-year average.

According to ABS data for August 2019 they made up 37.4 per cent of the market, nearly 5 percentage points above the decade average of 32.6 per cent.

Activity levels were second only to the NT, where first-home buyers comprised 45 per cent of owner occupier mortgage demand.

CoreLogic Tim Lawless said these were the two regions where housing values had fallen the most, providing a substantial improvement to housing affordability.

“Dwelling values are down 27 per cent since peaking across the NT and 23 per cent lower since peaking across WA,” he said.

Source: ABS, CoreLogic.

First-home buyer activity also increased nationally where they made up the largest proportion of owner occupier mortgage activity since 2012.

Mr Lawless said there were are a variety of factors that had provided them with a leg up into the housing market.

“Housing affordability has improved through the recent housing downturn, mortgage rates have come down, home loan servicing rules have been relaxed and some states have provided additional incentives for first-home buyers in the form of stamp duty exemptions or discounts as well as existing first-home buyer grants, which generally apply to the purchase of new dwellings across most states,” he said.

“There’s also the fact that first-home buyers haven’t had to compete as fiercely with investors, with investor activity generally trending lower since peaking in 2015 at 43 per cent of mortgage demand.

“The August update shows investors comprised only 26 per cent of mortgage demand, which is well below the decade average of 34 per cent.”

Source: ABS, CoreLogic.

First-home buyers were least active are SA and Tasmania where they made up 22 per cent and 24 per cent of owner occupier mortgage demand in August.

Despite being the lowest of any state, first-home buyer participation was still above the decade average in these regions.

Mr Lawless said looking forward it was likely first-home buyers would reduce as a proportion of overall market activity.

“Housing prices are once again rising across most regions of the country while growth in household incomes remain sluggish, which will create renewed housing affordability pressures in markets where home values are rising faster than incomes,” he said.

“Additionally, investor activity is likely to ramp up as the prospects for capital gain start to become more widespread and the spread between rental yields and mortgage rates remains around record lows.

“Capital city gross rental yields are tracking at 3.7 per cent compared with three-year fixed rate mortgages for investment purposes tracking around 3.8 per cent.

“In the past, rising home values and greater participation from investors has seen first home buyer activity reduce.

“The First Home Loan Deposit Scheme, which goes live in January next year is likely to be oversubscribed, however we aren’t expecting this program to make a substantial difference to overall first-home buyer participation rates considering the scheme is capped at 10,000 buyers, which equates to less than 10 per cent of first-home buyers numbers over the past year.”

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