Could this be the end for first home buyers?

Recent data from the Australian Bureau of Statistics has shown first home buyer numbers started to drop in February, after peaking at 16,664 the month before. One month later, CoreLogic’s national home value index rose 2.8% - the fastest monthly rate of appreciation since 1988. With property prices tipped to rise by as much as 17% this year by the banks, and supply issues meeting head on with strong demand, FOMO is thriving in Australia at the moment. But does this mean the end for first home buyers? And where do brokers sit within all of this?

According to REINSW CEO Tim McKibbin, while rising house prices in Australia’s most expensive city of Sydney will no doubt come as a challenge to many first home buyers, historically speaking, FHB numbers are still strong.

“It doesn’t surprise me as the prices rise that first home buyers are going to find it more and more difficult,” he told MPA. “Having said that though, first home buyers as a percentage of the market over the past 12 months, the percentage of purchases has been a lot stronger than what we have seen in the last 20 years probably. They have been very active in the market.”

According to the ABS, first home buyer numbers jumped from 8,599 in May 2020 to 16,664 in January this year before dropping to 16,117 in February.

McKibbin said to address housing affordability, the government needed to address a longstanding supply problem while looking at the amount of tax imposed on new property.

Read more: "There is only one solution to this and that is supply"

In the meantime, there are still state government incentives or “the removal of disincentives” that could aid first home buyers, such as the stamp duty concessions offered by the NSW Government, he said.

He pointed to the importance of maintaining strong lending standards as buyers purchase more expensive properties at low interest rates.

“The thing that COVID demonstrated to us is how fragile our economy is,” he said. “People need to ask themselves the question when they are committing themselves to substantial payments, what’s my plan if something should happen? Mortgage brokers should be looking to counsel people on that issue.”

According to AFG state sales manager NSW and ACT David Vizza, brokers are well positioned to handle the challenges of a rising market.

“Brokers are placed to help a range of customers and have the skills to adapt to market conditions, which is why they are the preferred choice among Australians when it comes to sourcing funding,” he said.

It has been great to see the opportunities presented to first home buyers through low interest rates and a range of state and federal government incentives through the pandemic, he said.

“Although first home buyer numbers have started to slow, they are historically high. I think instinctively we knew the support packages brought some volume forward and first homeowners have been huge beneficiaries of this,” he added.

The pandemic support packages have had a knock-on effect on the construction sector while the competitive low interest rate environment is creating further opportunities for refinancers and brokers.

Read next: You need to act on house prices - NAB

“I tend to think we’ll see an increase in investors looking to get back into the market and that will drive a different type of activity for our brokers,” he said. “The real question is, with interest rates forecast to be low for some time, is just how much volume has been brought forward and how much is actually the new normal?

“However it all plays out, with over 60% of all consumers now using a mortgage broker to source their finance needs, the team at AFG tend to think that brokers are well placed to continue to grow their share of new customers.”

Kate McIntyre is an online writer for Mortgage Professional Australia. She has a wealth of experience as a storyteller and journalist for a range of leading media outlets, particularly in real estate, property investing and finance. She loves uncovering the heart behind every story and aims to inspire others through the artful simplicity of well-written words.
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