First Home Saver Accounts abolished in Federal Budget

THE blows keep coming for first home buyers who continue to be pushed out of a booming property market that has lured in investors in droves.

THE blows keep coming for first home buyers who continue to be pushed out of a booming property market that has lured in investors in droves.

The abolishment of the First Home Saver Accounts in this week’s Federal Budget was another hit was hopeful entry-level buyers with the death knell signalled for the accounts which offer users healthy returns of up to 17 per cent.

The removal of first homeowner grants for established properties and record-low interest rates has also resulted in a surge of investors in recent years who have gradually squeezed out entry-level buyers.

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Data from Mortgage Choice shows in the March quarter of this year first-home buyers accounted for just 12 per cent of all loans written compared to 28 per cent in the March quarter.

Investors accounted for about 25 per cent of loans written in the first quarter of 2009 compared to about 27 per cent in the first quarter of 2014.

Mortgage Choice spokeswoman Jessica Darnborough said the investor appetite remained strong and had resulted in an increasing number of first-home buyers dropping out of the market.

“It’s definitely an investors’ market,’’ she said.

“We are now even starting to see first home buyers appear as investors because they can’t afford to buy where they want to live so they are choosing to invest in the first instance.’’

Loan Market figures also showed a huge drop-off in entry-level buyers in the past five years.

In 2009 first-home buyers accounted for 24 per cent of the market — this fell to just 11 per cent this year.

In 2009 investors accounted for 48 per cent of the market compared to 57 per cent this year.

Loan Market director Mark de Martino said the constant hits to first-home buyers had made it increasingly tough for them to enter the market.

“The removal of First Home Buyer grants and stamp duty concessions has made it even more difficult for first time buyers as they have only their savings to compete against the equity of Investors,’’ he said.

The Reserve Bank of Australia’s head of financial stability, Dr Luci Ellis, this week urged despondent first-home buyers to remain “patient” and not be deterred by a booming property market.

“It’s no surprise as interest rates have fallen it’s the trade-up buyers and investors whose demand has increased,’’ she said.

“Meanwhile first-home buyers will feel squeezed out.

“It’s still probably quite disheartening for first-home buyers, we recognise that.’’

Originally published as First Home Saver Accounts abolished in Federal Budget