Are foreign investors destroying the first home buyer market? Paul Bevan

Are foreign investors destroying the first home buyer market? Paul Bevan
Are foreign investors destroying the first home buyer market? Paul Bevan


There have been many articles recently by those in the industry claiming there is a massive issue with housing affordability for first home buyers. More often than not, foreign investors are the target of this fury.

Often these articles quote the alarmist figures of first home buyers numbers (as a % of all dwellings financed) dropping from the long-term average of 22% to just 12%.

Issues such as reduced affordability and foreign investment are often touted as the reasons for this drop-off in first home buyer activity. 

Unfortunately, for those espousing this propaganda, the figures are simply incorrect.

Way back in February 2015, the ABS announced that there was an issue with the data.

“An investigation by the ABS has identified that the data on first home buyers are under-reported, as some lenders have only reported loans to first home buyers who have also received a First Home Owner Grant.”

Now, quite clearly, this fails to capture first home buyers that do not utilise the grant, do not qualify for the grant, or who choose to purchase a property that is not eligible to receive a grant. Quite simply, this statistic is a completely inadequate indicator of first home buyer activity.

Yet, it continues to be quoted by those that either don’t understand the information or who choose to use this statistic to further their own cause regardless.

In June 2015 the RBA submission to the Inquiry into Home Ownership stated the following:

“Housing ‘affordability’, measured as the share of average household income required to service a loan on a median-priced dwelling, has continued to cycle between 20 and 30 per cent, and is currently well below previous peaks.”

The vast majority of first home buyers purchase well below the median price and in many instances can purchase with as little as 5% deposit or with the support of family, no deposit at all.

Some would argue, that there has never been a better time for First Home Buyers to enter the market.

But, are they simply being outbid by Foreign Investors at auction as is often claimed?

Well, the Foreign Investment Review Board clearly states that Foreign Investors can only purchase:

  • A New Dwelling
  • Vacant Land
  • An Established Dwelling To Demolish & Redevelop

I don’t think it’s too much of a stretch to rule first home buyers out of the latter category, so, the only competition that first home buyers face is when purchasing brand new dwellings or off the plan.

The majority of these are offered at a fixed price by the developer and rarely go to auction, so, again, the implied issue of first home buyers being outbid at auction is again a long bow to draw.

Historically, first home buyers purchase older or smaller properties in locations they can afford and work their way up the property ladder over a number of years to achieve their dream property. This is often achieved through a process of increasing income with age and experience and a build-up of equity-either manufactured through renovations or naturally as part of the property cycle.

I would suggest that you listen very closely to those that are claiming there are so many issues with housing affordability for first home buyers and question not only their motives, but, the so-called facts they use to support these claims.

Paul Bevan is senior advisor at Dream Financial Services and can be contacted here.

First Home Buyers Foreign Investment

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