Speculation that first home buyers (FHBs) were, and still are, being forced out of the market by investors is unfounded says the Housing Industry Association (HIA). But, housing market experts disagree as they play the trump card in their hand.
Waiting for the perfect opportunity to lay their cards on the table, housing market experts are now suggesting that the HIA is relying on propaganda to move interest away from the negative gearing debate. The rationale behind comments that housing market experts have made is associated with bank figures showing that investors are purchasing the majority of pre-existing dwellings. Furthermore, the number of new dwelling purchases by investors has fallen since the re-introduction of negative gearing in 1987.
However, in its latest housing industry report, the HIA suggest that FHBs are not being forced out of the market. But rather, FHBs have decided that the stakes are far too high and that they’ll wait for a more affordable opportunity to re-join the housing market.
The Factors that Point to First Homebuyers Re-entering the Market in the Near Future
The HIA predicts that first home buyers will soon begin to re-enter the market. This is attributed to the fact that a lack of first homebuyers in the market can be explained by a number of factors.
The most prominent factor is that the federal government first home buyer stimulus package encouraged FHBs to purchase a home. This package caused a significant increase in FHB activity. According to the Australian Bureau of Statistics (ABS), this activity peaked in November of 2009, where approximately 190,000 FHB mortgages were issued to home owner occupiers. At this time, FHBs comprised of 29 percent of the owner occupier market. However, the federal government stimulus package has now ended. Since then, the FHB owner occupier share of the market has fallen with November 2013 rates recorded at 12.3 percent. This was the lowest it’s been since July 1991.
According to the HIA, other factors that have contributed to the decline in FHB owner occupier mortgages are attributed to changes in the labour market, where weaknesses have surfaced, this and other economic indicators have lead to FHB market caution, despite low home loan interest rates.
However, the HIA predict that the low numbers of FHBs in the owner occupier market will soon begin to increase. In fact, signs have already started to emerge with the 25 to 35-year-old age group share increasing. Strong growth in home prices is further expected to encourage FHBs to re-enter the market with the prospect of increasing home equity acting as a draw-card.
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Written by eChoice