Both the number and proportion of first home buyers have reached record lows across the Australian housing market in August.

Both the number and proportion of first home buyers have reached record lows across the Australian housing market in August.

Housing finance data released by the Australian Bureau of Statistics recently highlighted the severe lack of first home buyer participation in the market. The August release showed that 6,054 first home buyers committed to housing finance over the month. Outside of the seasonally low months of January and February, this was the lowest month on month reading since June 2000. Looking at the annual number of first home buyer mortgages, there were 77,869 first timer home loans committed to over the 12 months ending August 2014; the lowest annual number of first home buyer commitments on record.

On a proportional basis, first home buyers comprised just 11.8% of all owner occupier housing finance commitments which is another all-time low. There has only once been a period previously when first home buyers comprised less than 15% of all owner occupier housing finance commitments; that was between April 2003 and June 2004 after dwelling values had risen substantially across the nation. Outside of the currently cycle, the previous record low for first home buyer loans was recorded in March 2004 at 12.8%.

 

 

From state to state and territory to territory there are substantial differences in first time buyer trends. The states and territories showing the most severe first home buyer trend are New South WalesVictoriaQueensland and the Australian Capital Territory. Each of these regions is showing first home buyers to be less than 12% of all owner occupier housing finance commitments and first time buyer numbers are either at record lows or close to the record low.

 


 


 

 

In South AustraliaWestern Australia and Tasmania, first home buyer trends have been healthier with the number of first home buyer housing finance commitments moving higher over the past few years. The escalating trend has stalled since mid-2013 in SA and WA but has remained relatively strong in Tasmania which is also the most affordable state for housing.

 


 


 

 

The broad slowdown in first home buyer demand can probably be attributed to a few factors.

Firstly, with dwelling values rising at a time when average wages aren't rising anywhere near the same pace, affordability constraints are dampening first home buyer demand. This is particularly the case in Sydney and Melbourne where dwelling values have risen substantially.

Another factor can probably be attributed to the availability of First Home Buyer grants. When the First Home Buyers Grant Boost was available in 2009 we saw the number of first timers active in the housing market surge higher as this cohort of the market scrambled for the $14,000 available on an established home purchase or $21,000 for a new home. When the 'boost' to the First Home Buyers Grant was scaled back in October 2009 and then removed in January 2010 we saw first home buyer numbers virtually fall off a cliff. The 'echo' surges in first home buyer numbers that can be seen in individual graphs to the right can be attributed to the state centric incentives that were available at different times in different states which typically took the form of changes in either stamp duty concessions or eligibility changes to first home buyer grants.

Another factor that might be playing out in the first home buyer data is that more first home buyers simply aren't indicating that they are in fact first time buyers at the time of committing to finance. Where a first home buyer isn't eligible for a grant or concession they may simply be flying under the radar and not being counted.

And finally, another anecdotal observation is that more first time buyers aren't purchasing a principal place of residence; they are buying an investment property which means they aren't counted in the Bureau of Statistics first home buyer numbers. For many first home buyers, the areas where they would like to live are simply too expensive to buy into, so they purchase an investment property while renting in an area closer to where they work and play (or live with Mum and Dad for longer...).