Debbie Shankar - 24 Jun, 2016

The Drive Behind First Home Buying

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The primary drivers of first home buying activity are increases in housing supply and economic growth. So with investor numbers falling and more property on the market, and a steady Australian economy, now may be the right time for you to buy your first home.

First Home Buying Trends

A recent analysis of Australian home buying trends has found that Victoria recorded the greatest increase in first home buying activity over the last 12-months. This state also recorded the highest number of new build completions since 2009. Queensland, on the other hand, recorded a high level of new home completions, and has the 2nd highest rate, by state, for first home buyer lending, according to the Australian Bureau of Statistics (ABS).

First home buying numbers typically tend to increase when either the Federal Government or state government raise their FHOG. Let’s look at the data:

First Home Buying Data

State 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
ACT 1,851 1,668 3,038 1,526 1,401 1,465 1,695 1,960 2,067 119
NSW 38,630 36,482 58,909 27,251 30,422 24,489 24,862 25,744 24,715 1,489
NT 1,064 1,005 1,207 588 697 958 741 843 566 35
QLD 31,645 23,482 36,373 15,791 16,422 20,516 18,069 18,573 18,882 1,357
SA 7,896 8,024 12,420 5,714 5,003 5,749 7,343 7,054 6,156 414
TAS 2,104 2,241 3,206 1,435 1,318 1,316 1,618 1,806 1,665 168
VIC 34,881 31,827 47,700 28,977 24,612 28,428 30,006 28,186 29,593 1,980
WA 15,012 15,686 24,821 11,962 13,209 17,741 20,709 20,357 17,711 1,106

Source: Australian Bureau of Statistics (ABS)

First Home Buyers, Housing Supply and the Australian Economy

Economists suggest that housing supply increases are assisting to make homes more affordable for first home buyers. The same economists also suggest that favourable national economic conditions stimulate greater buying activity.

According to ABS data, the first significant rise in first home buying activity occurred in 2009. Driven by the onset of the global financial crisis (GFC), the Federal Government offered first home buyers a stimulus package. The next peak in first home buying activity occurred in 2013 when state governments offered first home buying incentives.

Overall, on a national level, first home buying has fallen since 2013. However, there is a high variation in state activity, which is said to be dependent on economic conditions. For instance, Western Australia had strong first home buyer numbers from 2009 to 2014 when mining was booming, but these figures have decreased significantly in 2016 as mining activity has almost ceased.

A state’s economy is an influencer for first home buyers as the home buyer has greater confidence and a sense of increased financial stability. Economically speaking, Australia’s weakest states were Western Australia and Tasmania; these states also have lower population numbers than other states. New South Wales continues to be the exception to the trend, as it has strong growth in new builds and a strong economy, but housing affordability remains to be a problem.

The Perth property market shrunk with its economy, whereas Tasmania’s is continuing to grow along with its economy. Hobart’s property market is said to be one of the tightest in the nation with 25% less homes in this city on the market, compared to 12-months ago. Hobart rental vacancy rates are low and rental yields high, with property prices increasing.

Sydney predominately has a short supply of homes. This lack of accommodation is consistent with low levels of dwelling completions that have occurred across the state in comparison to population growth.

Over the last 5-years, Sydney building approvals have risen considerably. This increase has seen pricing growth moderate. If supply were not as high in this area of Australia, then prices could be even greater than they currently are.

Record low-interest rates have also enabled first home buyers to gain access to funding and encouraged them to save more. Those first home buyers who can provide a potential lender with a strong saving history also give themselves a higher chance of securing a home loan.

Are you looking to buy your first home? If you said YES, then contact eChoice. We can assist you to find an affordable home loan today.

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