Nell Matzen - 11 Feb, 2021

First home buyers driving the property market in 2021

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The events of 2020 brought a unique set of challenges, whilst simultaneously creating the conditions for a boom in first home buyers.

Data from the Australian Bureau of Statistics (ABS) and auction rates from around the country have revealed that first home buyers are snapping up properties in droves.

Speaking at a Standing Committee on Economics public hearing, Reserve Bank Australia (RBA) Governor General Philip Lowe said that it might be a good time for first home buyers to enter the market.

“It’s actually a good time if you’re a first home buyer to buy the property that you’ve wanted. Interest rates are low, they’re going to stay low,” he said.

“There are very large government incentives for first home buyers, and housing prices really are across the country no higher than they were three years ago,” he said.

“So, for a first-home buyer with income security I think it is a good time to buy,” he said.

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The ABS revealed that first home buyers accounted for 32.4% of the record high loan approvals in August 2020.

The ABS also noted that the number of new loan commitments in August for first homebuyers hit the highest level since October 2009.

At this time owner-occupiers (including upsizers and downsizers) still accounted for most housing sales, but a surge in first homeowner sales saw first homebuyers dominate the market by the end of the September Quarter.

According to research conducted by Westpac, the number of Australians looking to enter the property market more than doubled since 2019 – from 7% to 16%.

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Where are first homeowners looking to buy?

Keeping in line with current buying trends, data released by NAB revealed that first homeowners are looking to settle in regional areas and the outer suburbs of major cities.

Although working from home now means living close to your workplace is no longer essential, home buyers are still looking for amenities that they enjoyed in the city.

People are still looking to buy in regions with good schools, cafes and other amenities

NAB Executive Home Ownership Andy Kerr said that proximity to nature and a more relaxed lifestyle was driving people to coastal regions.

“There are positive stories across regional NSW, particularly coastal towns, with the Central Coast one of the most significant growth areas for first-home buyers in the country,” Mr Kerr said.

“The access to quality beaches and a more relaxed lifestyle are also obvious drawcards further north in and around Port Macquarie and Ballina,” he said.

This trend is reflected in the significant rise in lending activity in the coastal areas near Sydney, Melbourne and Brisbane, with the Central Coast of NSW experiencing a 111% increase and earning the title of the one most significant growth regions in the country.

Browns Plains, which is situated south of Brisbane, followed closely behind with a 106% increase. And Geelong’s Armstrong Creek saw similar figures, experiencing a 97% growth in lending.

Regional areas have seen similar numbers of first home buyers entering the market, both looking to build or buy existing dwellings.

Most of the major cities are experiencing booms in their outer suburbs, but Queensland’s first homeowner hotspots are spread far and wide.

The isolated mining town of Mount Isa has seen a 115% increase in lending, and areas as far North of Cairns experiencing a slight rise in demand.

However, even with the regional boom, there is still a strong demand for properties close to major city hubs.

Buyers in Sydney and Perth are looking for properties within 10km of the CBD.

The hot properties in Adelaide and Brisbane are 20km from the CBD, with Melbourne buyers willing to travel the furthest looking for home 40km from city action.

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Why are first homeowners flooding the market?

The surge in first homeownership can be attributed to a number of factors, most of which were a result of the COVID19 pandemic.

First home buyer schemes

Both the federal and state governments have implemented a number of initiatives to help first home buyers get into the market.

According to Canstar Finance Expert Steve Mickenbecker, The HomeBuilder Grant, First Home Owners Grant and the First Home Loan Deposit Scheme, plus a variety of additional grants put in place by the states and territories, have all played a part in the surge of First Home Buyers entering the property market.

“First home buyers are flooding into the market, having responded to government support measures,” Canstar finance expert Steve Mickenbecker said.

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Monetary policy easing

The RBA’s monetary easing policy has also played a role in the increase of first home buyers.

Mortgage Choice CEO Susan Collins said that the Reserve Banks had contributed to the rise in buyer demand by supporting record low-interest rates.

“Policy measures are helping to prop up the housing market, with the rise in home loan commitments expected to continue in the near term,” she said.

Currently, the cash rate is 0.10%, with the Reserve Bank announcing in December it will remain the same for the next three years.

To aid in Australia’s recovery from the financial impact of the pandemic, many lenders passed down the savings to their customers in one form or another.

ANZ Group Executive, Australia Retail and Commercial, Mark Hand said that ANZ would support both the Reserve Bank and government’s efforts for economic recovery.

“The RBA and the government are rightly focussed on supporting the economy by making long-term financing cheaper for small businesses and households during this difficult period. ANZ continues to play its part,” he said

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Lack of competition

According to CoreLogic, a lull in investor activity and halt on overseas buyers has given first home buyers a better chance at placing the winning bid.

Australia’s hard international border has slowed competition from overseas investors and added to high rental vacancy rates, which caused investors to retreat from the market.

CoreLogic’s Head of Research Eliza Owen explained that the inner-city rental markets of Sydney, Melbourne and Brisbane were particularly impacted by the closure of international borders

“Historically high demand from overseas migrants has been disrupted,” she said.

AMP Capital Chief Economist Shane Oliver that in addition to government schemes, these two factors created an ideal market for first home buyers.

“All these things added up to something which made it a lot easier for first-home buyers to get into the market,” Dr Oliver said.

Record high savings

For those who were lucky to have stabled employment over nationwide and state lockdowns, 2020 has been a fantastic year for saving.

According to Dr Lowe the lack of spending opportunities has allowed many first home buyers to pay down debt, or put money toward a house deposit, putting them in a better position to take on a mortgage.

“It is also worth noting that over the past six months, many households have improved their finances and paid down debt,” he said. 

ABS data revealed that over the 2020 June quarter, the household savings to income ratio increased to 19.8 per cent — up from 6 per cent over the previous quarter.

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Words by Nell Matzen


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