The number of first home buyers purchasing homes has risen by 32.6 per cent in the year to September 2017, new research has found, with the result reflecting the improvement in housing affordability.
The September quarter edition of the Adelaide Bank/Real Estate Institute of Australia Housing Affordability Report analysed data from all major lending institutions and revealed that there were 28,919 first home buyers (FHBs) in Australia in the September quarter — 22.8 per cent more than the prior comparative period, or nearly a third more when compared to the 12 months ending September 2017.
According to the analysis, the number of buyers coming to market for the first time rose in all states and territories, making up 20.6 per cent of the owner-occupier market. If refinancing is included in this figure, then the statistic rises to 24.5 per cent.
This figure is the highest rate since September 2013.
The increase is notable given that the average loan size of first home buyers increased by 0.6 per cent over the quarter to $319,500. However, compared to 12 months ago, the average loan size had dropped by 0.1 per cent.
NSW recorded the largest increase in first home buyers (57.7 per cent), followed by Victoria (32.2 per cent), the Northern Territory (14.3 per cent) and the ACT (20 per cent).
Part of the reason for the increase was an overall improvement in housing affordability (a ratio of family income to average loan payments) across all states and territories.
The Housing Affordability Report found that the proportion of median family income required to meet average loan repayments decreased by 1.2 percentage points over the quarter to 30.3 per cent.
This was a decrease of 0.6 percentage points compared to the same quarter in 2016.
In the quarter, the average loan size decreased to $380,916, 1.5 per cent less than the same period in 2016.
All states and territories saw the average loan size drop, except for Queensland.
In the three months to September, the total number of loans (excluding refinancing) increased to 118,112 — or 12.5 per cent up on the same quarter last year.
Speaking of the findings, Darren Kasehagen, head of business development at Adelaide Bank, said: “The increase in housing affordability across all states and territories is to be welcomed and is reflected by heightened activity in the number of first home buyers coming back into the market.
“Housing affordability is still a major issue in Sydney and Melbourne, but there are some bright spots in the latest report from the other capitals that are also worthy of note.
“The ACT had the largest decrease in average loan size for the quarter. [Around] 18.5 per cent of family income in Canberra was devoted to meeting average loan repayments — which is still the lowest in the country — and the gap between renting and buying in Canberra is now only 0.4 per cent. Again, an equation that may see more people now renting in the ACT deciding to take the step towards home ownership.”
He added: “Wherever you decide to live, Adelaide Bank’s continuing and widely recognised contribution to improving housing affordability is to keep the cost of lending as low as we can, while providing great service through Australia’s growing network of mortgage brokers.”
The report comes amid a flurry of affordability and first home buyer reports, with the Bankwest First Time Buyers Report 2017 revealing that FHBs are as active as ever in the Australian housing market but are spending more time saving for increasingly higher deposits.
This report showed that Australian FHBs are now spending more time saving for deposits before purchasing a home, with the report revealing that, on average, FHB couples now spend 4.6 years saving for a 20 per cent house deposit (or $111,080 on a median priced home), up from 4.4 years spent saving on a deposit of $103,907 in 2016.
The report also found that, on average, FHB couples are spending 4.2 years saving for a unit, five months shorter than the time spent saving for a house.
Bankwest’s general manager of personal & small business banking, Donna Dalby, added that with the exception of Perth and Darwin, FHB couples in Australian major cities are on average spending two months longer saving for a home deposit.
Meanwhile, Westpac’s 2017 Home Ownership Report, also released this past week, showed that FHBs are less focused on buying homes in popular areas, or areas close to their work, suggesting that affordability challenges are making buyers “increasingly flexible”.
The head of home ownership at Westpac Group, Andy Wright, said: “These attitudinal shifts among first home buyers towards home ownership suggest we may see more looking to buy in areas that they hadn’t considered, with many previously thought ‘essential’ features now just ‘nice-to-have’.
“In fact, the market saw home loans to first home buyers rise to a four-year high of 17.4 per cent in September of this year, which suggests we may be already seeing the positive results of these shifts.”
Annie Kane is the editor of The Adviser magazine, Australia’s leading magazine for mortgage brokers. As well as writing news and features on the Australian mortgage market, financial regulation, fintechs and the wider lending market – Annie is also the host of the Elite Broker podcast and regulator contributor to the Mortgage Business Uncut podcast.
Before joining The Adviser team at Momentum Media in 2016, Annie wrote for a range of business and consumer titles, including The Guardian (Australia), BBC Music Magazine, Elle (Australia), BBC Countryfile, BBC Homes & Antiques, and Resource magazine.
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