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FHB activity falls despite improvement in affordability

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Charbel Kadib 6 minute read

Housing affordability pressures have eased but first home buyers have not reaped the rewards, according to new research.

The latest Adelaide Bank/REIA Housing Affordability Report has revealed that over the three months ending 31 March, the portion of income needed to service a mortgage fell by 0.9 per cent over the quarter and by 1 per cent year-on-year, falling to 30.3 per cent.

Affordability improved across the country, with the exception of the Northern Territory, where the proportion of income required to meet loan repayments increased by 0.8 per cent to 20.2 per cent in the March quarter.

Off the back of sharp falls in Sydney’s dwelling values, NSW boasted the largest improvement in housing affordability, with the proportion of income needed to meet home loan repayments falling by 1.3 per cent over the quarter to 35.4 per cent.


However, NSW remains the least affordable part of the country in terms of the portion of income needed to service a mortgage, followed by Victoria (32.5 per cent), Queensland (27.6 per cent), South Australia (26.9 per cent), Tasmania (25.4 per cent), Western Australia (22.6 per cent), the ACT (20.3 per cent) and the Northern Territory (20.2 per cent).

Commenting on the findings, Darren Kasehagen, head of third-party banking, Bendigo and Adelaide Bank, said: “The marginal improvement in housing affordability shows further movement in a direction that should be encouraging to first home buyers.”  

However, the research found that despite the nationwide improvement in affordability, first home buyer (FHB) activity dropped by 19.7 per cent over the quarter and 11.6 per cent year-on-year.

Mr Kasehagen expects FHBs to face further competition in the housing market as demand spikes off the back of the federal election outcome, APRA’s proposed changes to mortgage serviceability guidelines, and the Reserve Bank’s cut to the official cash rate.

“What is fairly certain is that a combination of factors now makes it likely that people wishing to enter the property market for the first time will be facing a pickup in competition from other buyers – particularly in the East Coast residential housing market – as restrictions on lenders are further eased and interest rates remain at historic lows,” he said.


“Property buyers who have been sitting on the fence will now begin to crystallize their thinking and can be expected to act more decisively – and no doubt more swiftly.”

According to the research, FHBs made up 18.9 per cent of the owner-occupier market, and now represent 26.9 per cent of the market (refinancing excluded) as at 31 March 2019.

The average loan size issued to FHBs increased nationally to $338,251, up 0.2 per cent over the March quarter and 1.7 per cent over the past 12 months, with the average loan size to FHBs increasing in all states and territories except NSW and Victoria.

The fall in FHB activity coincided with a decline in the total number of loans (excluding refinancing) issued, down 20 per cent from the three months to 31 December 2018, and 13.7 per cent from the previous corresponding period.

The average loan size fell 2 per cent to $387,850 over the quarter and 2.3 per cent in annual terms.

 [Related: Property sentiment on the rise]

FHB activity falls despite improvement in affordability
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Charbel Kadib

Charbel Kadib

Charbel Kadib is the news editor on The Adviser and Mortgage Business.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

Email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.


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