First home buyers are back: QBE

First home buyers are back in the market at rates not seen in eight years, amid falling prices, oversupply and investor curbs.

Bidders at a recent Sydney auction.

First home buyers are capitalising on falling house prices, oversupply and investor restrictions, jumping into the market at rates not been seen in eight years.

Lending to first home buyers increased 30 per cent around the country in the past 12 months and this trend is expected to continue. Sydney first timers have benefited the most from declining prices, with loan approvals surging 74 per cent.

QBE Lenders’ Mortgage Insurance CEO Phil White said the result shows home ownership is still in the grasp of younger buyers.

“We haven’t seen the first homebuyer market this strong since the Australian government’s 2008 stimulus plan following the global financial crisis, which saw $1.5 billion allocated to first home buyers,” Mr White said.

“The increases in the volume of first home buyers has been supported by improvements in affordability and first homebuyer incentives.”

This rapid growth, coupled with tighter restrictions on investor lending, has seen the number of investment loan approvals fall 11.1 per cent in the past 12 months.

“Record low interest rates in recent years had seen a surge in investor lending, but this year’s report shows investor lending scaling back, which should also provide further room for first home buyers over the next couple of years,” Mr White said.

“Lenders’ responses to regulatory restrictions have contributed to the softening of the market.

“State government incentives have encouraged first home buyers to enter the market after several years of being pushed out by domestic and foreign investors.”

Dwellings in Sydney and Melbourne will be subject to price drops in the next three years.

QBE predicts house prices in the Victorian capital will be hit hardest, falling 2.5 per cent, while Sydney will see the only other decline at 1.2 per cent.

Adelaide will encounter the largest growth of 12.4 per cent, followed by Brisbane at 11.3 per cent and Canberra at 10.4 per cent

Median house prices are still forecast to outpace the rest of the country by almost double.

The outlook for units is not as positive, with half of the country’s capital cities to decline by 2021.

Brisbane’s unit prices are expected to drop 5.1 per cent, largely impacted by oversupply. Darwin could see falls of 4.5 per cent, making the city the cheapest to purchase an apartment.

Hobart and Adelaide are predicted to see the biggest unit price increases, at 9.3 per cent and 6.3 per cent respectively.