First home buyers squeezed back out of property market

New figures show investors are back in the property market squeezing out first home buyers despite a range of incentives.

First home buyers Kim Nguyen and Arnie Brabbs have been searching for a home but keep missing out in the current housing boom. Picture: Toby Zerna

A moment in the sun for first home buyers looks like it is rapidly coming to an end and as surging house prices box out younger buyers in favour of investors.

Strongly supported by government grants, low interest rates and a brief softening in national house prices, FHBs had powered into the property market a year ago, leading the first stage of a price recovery which has now taken off.

But new figures show the monthly value of FHB loans has dropped for the first time since May last year with Australian Bureau of Statistics showing a 4 per cent fall in total loans.

Moreover, the value of loans to investors has just exceeded the value of loans to FHBs in dollar terms at $6.94bn against $6.88bn (ABS figures for February).

Industry analysts now expect the trend to extend further, especially as government grant packages mature and prices inch higher (new figures from the ABS are due this week).

Though house price increases failed to match the record-setting pace of acceleration notched up in March, the latest CoreLogic figures for April show prices rose another 1.8 per cent nationwide compared to the 2.8 per cent monthly clip recorded a month earlier.

Investors have stepped in to propel the property market as first home buyer participation has waned.

AMP Capital chief economist Shane Oliver says: “While first home buyers led the initial recovery, spurred on by various incentives, housing finance data suggests that first homebuyer demand may now have peaked: Investors are jumping in to take over.”

Falling house prices and lower mortgage rates had briefly buoyed home affordability in 2020 which improved by 0.7 per cent according to the Real Estate Institute of Australia — FHBs at one stage were taking one in four home loans, recovering from a period where the figure had dropped lower than 15 per cent.

Grants little help

Despite the continuing menu of grants at state and federal level, younger home buyers have had to deal with a steady increase in absolute prices which in turn demand ever larger mortgages. On a nationwide basis house prices are now a solid 10 per cent higher than eight months ago. House prices continue to perform more strongly than unit prices.

Housing bears who have played down the price lifts so far this year will certainly jump on the slowing data from around the nation citing price sensitive owner-occupiers, very weak wage growth and a rising supply of new homes.

But more broadly the wider story of extending house price gains look set to continue in the months ahead even if the monthly increase softens in due course.

Commonwealth Bank, the nation’s biggest home lender, has forecast a 14 per cent increase in house prices by the end of 2022.

Kristina Clifton, senior economist at CBA, says: “The leading indicators are pointing to further growth ahead with new lending growing at a strong pace and auction clearance rate running very high — though we do expect the pace of monthly gains to slow from here.”

The latest CoreLogic figures show the clearance rate still very strong, running at nearly twice the rate of this time last year — the weighted average national rate was 77 per cent, well above long-term averages, and those rates were struck on volumes of 2876 auctions last week compared to just 612 this time a year ago. Nonetheless total listings are flat compared to the start of this calendar year.

On a quarterly basis Sydney remains in the lead with a 8.8 per cent improvement and Hobart is next with 7 per cent. The national figure for the three months to April 30 is 6.8 per cent.

Originally published as First home buyers squeezed back out of property market