First home buyers’ dream ‘slipping away’

Jacob Greber and Jason Murphy
The property market looks to be leaving a generation of younger Australians locked out of homeownership. Firs time home buyers accounted for just 9.l per cent of the value of home loans issued in September, despite the best levels 01 affordability in about 10 years based on measures of how much of a person’s income is needed to service a mortgage. It was the lowest proportion in records going backto1991, according to Deutsche Bank calculations based on Australian Bureau of Statistics data released Monday.

A few year’s ago first-time buyers borrowed one in every four dollars taken out in home loans. “The greater Australian dream of home ownership is slipping away from some potential first-homeowners in Australia’s largest capital cities,” said Citigroup economist Joshua Williamson. ! “Left unchecked, this will likely affect productivity and opportunity in the economy.” Deutsche Bank economist Phil O’Donaghoe said the figures suggest strong demand from buy-to-let property investors is forcing first-time buyers into homes in cheaper markets and further from job centres. “Not only are first homeowners feeling pressure, but they’re being pushed into lesser or poorer quality dwellings further on the urban fringe,” he said. Economists argue that many younger buyers have been discouraged by trying to compete for property against older generations and foreign investors and are choosing to stay in rental accommodation longer. “There’s probably a lot 01 hidden demand for housing, whether it’s people who are renting who prefer to live close to work or are still living with parents – and neither the parents nor the kids are happy and that” Mr O’Donaghoe said.

Westpac’s Matthew Hassan added that some of the weakness reflected the fact that previous state government grants to first-time buyers had effectively pulled forward their decision to buy. He said much of the recent drop in activity had been in Victoria, where approvals have collapsed by a third since June, when the state government reduced first-home buyers’ assistance. At the same time, some markets may see greater participation from younger buyers. The Tasmanian government this week said it would double the first home buyers grant to $30,000. More broadly, Monday’s bureau 01 statistics data added to evidence that the Reserve Bank of Australia’s interest rate cuts are stimulating the housing market. The total number of home loans approved rose 4.4 per cent from August the biggest gain in six months. Total loans to so-called “upgraders” rose 7.3 per cent in September to be 26 percent higher over the year. The RBA cut the official interest rate t02.5 percent in August, and in the minutes of its October meeting noted. That housing credit was edging higher. Auction clearance rates last weekend were 69 per cent in Melbourne and close to 80 percent in Sydney, which is set for a record month.

The latest figures will be welcome news to the RBA, which is counting on renewed demand for property to spur fresh construction and create jobs for workers as the mining investment booms recedes. However cheap credit has increased the risk that Australia’s house prices will rise too fast RBA governor Glenn Stevens admitted this month that some property price growth could be unsustainable.