First-time buyers dominate house sales

First home buyers accounted for more than half the market through 2020 as low rates and incentives supercharged purchasing.

First home buyers accounted for more than half the market through 2020 as low rates and incentives supercharged purchasing.

The Real Estate Institute of Australia’s (REIA) latest Housing Affordability Report found 50.4 per cent of market share last year belonged to first time buyers.

Historically, the cohort usually accounts for around 30 per cent of the market. But historically low rates combined with attractive incentives — such as the federal government’s HomeBuilder scheme, the expanded First Home Buyers Lending Deposit Scheme and additional state-based stimulus — to energise aspirational buyers.

The growth in market share came at the expense of housing affordability, which declined nationally in the December quarter 2020. The proportion of income required to meet loan repayments increased to 34.8 per cent, up 0.9 percentage points, over the period.

REIA president Adrian Kelly said that the decline in affordability was largely attributable to higher house prices and larger loans.

“The market defied the doomsday predictions with median house prices rising across the country in 2020 with demand driven mostly from first home buyers,” Mr Kelly said.

“Seeing this trend in conversion to home ownership is particularly great news given the challenges many tenants and investors faced over the pandemic however surging house prices could see housing affordability obliterated unless measures to improve supply are implemented. This particularly applies to regional parts of Australia.”

Property developer Stockland’s Group executive and CEO of Communities, Andrew Whitson, said the market share figure is reflective of their sales over the past six months.

“Our recent half year results revealed that in 2020 we had our strongest residential sales in four years and approximately half of that has come from first home buyers. People have been able to realise their home ownership dream sooner than they expected,” he said.

Overall, affordability through 2020 improved by 0.7 percentage points.

Housing affordability, measured by the proportion of income required to meet loan repayments, ranged from an increase of 0.1 percentage points in Victoria to an increase of 2.3 percentage points in NSW.

“NSW was the least affordable state, requiring 44.6 per cent of income to meet loan repayments. The median house price in Sydney is $1.06m. The Northern Territory, where the median house price in Darwin is $438,645, became so affordable over 2020 it is now cheaper to buy than rent a property.

Mr Kelly said rental affordability over the quarter declined by 0.2 percentage points, with the proportion of income required to meet rent payments increasing to 24 per cent.

Tasmania is now the least affordable state to rent, with tenants forgoing 29.5 per cent of their income to meet rent, 5.5 percentage points higher than the national level.