Ece Demir - 7 May, 2020

First Home Buyers are Still Active on the Property Market

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Amidst the COVID-19 pandemic, the property market in Australia seemingly grounded to a halt. However, the property market could stay afloat as a result of the many young first home buyers who have the job stability and savings to purchase a house.

This has been assisted by the plummeting interest rates and the ability to obtain cheap stock which has opened up the opportunity to grab a “once in a lifetime” cheap buy.

How has the property market progressed?

According to the Australian Bureau of Statistics, the latest issue report of Lending Indicators – First Home Buyers, states that in February 2020:

  • The number of owner occupier first home buyer loan commitments increased 0.4% in seasonally adjusted terms
  • The number of first home buyer loan commitments for investment purposes accounted for 4.5% of all first home buyer commitments, in original terms
  • Owner occupier first home buyer loan commitments accounted for 31.2% of all owner occupier commitments (excluding refinancing), in original terms.

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The most active participation of first homebuyers was recorded in Western Australia, where they comprise 40.9% of financing commitments. However, in terms of growth, New South Wales and Queensland reported the most substantial increases.

Overall, the number of loans to owner-occupiers for the purchase and construction of a new home increased by 5.8% over the three months to February.

Angela Lillicrap, an economist at the Housing Industry Association (HIA), said to Your Investment Property, “these results, along with other leading indicators such as new home sales and building approvals data, continue to confirm that the housing market reached a turning point mid-way through 2019.”

“The stable growth in lending for new homes in the month indicated that the market entered the period of uncertainty with a strong foundation,” said Angela.

Related: An Update on Aussie Property Insights

What schemes are available for first home buyers?

The latest study by the Digital Finance Analytics show that the number of first home buyers driven by potential capital growth has increased slightly over April, with close to 20% expecting home values to grow.

On the other hand, the First Home Loan Deposit scheme also attracted first home buyers. This scheme was implemented by the Morrison Government last year in May and has enabled first home buyers who are struggling to meet the 20% deposit requirement by lenders, a chance to apply for a home loan with as little as a 5% down payment.

This program started in January 2020 and was available to single first home buyers earning up to $125,000 annually and to couples earning $200,000 per year collectively.

Urban Development Institute of Australia national president Darren Cooper said to Your Mortgage, “supporting eligible first-home buyers who have saved a 5% deposit, by guaranteeing the balance of the 20% deposit through this scheme, is a great initiative. It truly is a leg up for first-home buyers.”

Cooper believes the scheme would be a great help for those Australians who are finding it hard to overcome the home loan deposit hurdle. He also believes that his scheme could not have come at a better time, since house prices have been increasing much faster than household incomes- resulting in many Australians taking up to a decade to save the 20% deposit.

You might also like: First Home Buyers Grant – Everything You Need to Know

Which suburbs and properties are currently popular?

The coronavirus pandemic and the economic changes that followed altered the market in mid-March and despite homes selling quicker than last year, sellers are adjusting their expectations and auction prices have slipped. More vendors are dropping asking prices, with 14% of listings revised in March. This is up from 5% in late 2019.

Apartments in Sydney’s western hot spots, units in Brisbane’s inner-city suburbs and entry level hom4w in Melbourne’s St Kilda could be the go-to for young first home buyers and survive the implications of COVID-19 as mortgage repayments outstrip rent for affordability.

You might also like: Melbourne’s most popular family suburbs

In an interview with Domain, Ray White New Farm agent Kevin Do, discussed Brisbane’s most popular central locations and said, “prices have dropped in suburbs such as Spring Hill for those one-bedroom apartments. They used to be high $300,000s to low $400,000 but now you can get one for $290,000.”

If you’re a first home buyer in Sydney’s considerably more competitive market, Ray White Parramatta agent Rowan Thredgold said the places were Parramatta and Westmead, and the price was in the low $500,000s for buyers still able to put down a deposit.

“A lot of them, they are looking for location above all – as in an apartment with easy access to transport and amenities,” Mr Thredgold said to Domain.

One of the biggest barriers for first home buyers right now due to the COVID-19 outbreak included the availability of finance. Concerns about unemployment substantially rose and have now become the fourth most significant barrier for first home buyers.

Martin North, principal at Digital Finance Analytics said to Your Mortgage, “the barriers for first-time buyers include the availability of finance. We know some lenders are asking more questions about employment and income than a month back.”

“I should caution we may see sentiment swing back in the weeks ahead as things play out, but in summary for now, demand for property is sinking, availability of finance is tightening, and the spectre of unemployment is rising,” North said.


Words by Ece Demir

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