Investors up, first home buyers down in the Melbourne market
A unique and interesting feature of the current housing market in Victoria is not only a rise in investor activity, but the falling numbers of first home buyers.
It may be easy to draw the conclusion that investors have forced first home buyers out of the market, however, this is not supported by the data available from the Australian Bureau of Statistics (ABS) data, rather it indicates a rise in the overall share of all non first home buyers.
Analysis of data from the ABS shows that the market share of local investors has been cyclical over the past decade.
In the most recent twelve months investors represented 36.1% of the total value of loans in Victoria compared to 34% in the preceding twelve months. In the twelve months ending Feb 2011 – the last rising cycle – the proportion was 37%. A similar rise was also evident in 2007 suggesting that as the market strengthens so too does the level of investor activity rise.
Unlike investors, the numbers of first home buyers have shrunk to record lows.
Unlike investors, the numbers of first home buyers have shrunk to record lows.
In February there were 1,402 dwellings financed for first home buyers in Victoria, a mere 11.7% of the entire number financed. This was lower than in January when they represented 12.7% of the market. In raw terms, this is the lowest since July 1991 when the population of Victoria was also 31% lower than it is today. More first home buyers are staying in rented accommodation or with family.
During the last rising cycle, in 2010, there were a higher proportion of both first home buyers and investors. When home values last peaked, in October of 2010, the proportion of first home buyers was 18.2%. Over that year investors were 37% of the market in value terms.
If first home buyers were being forced out by investors you would expect there to be a lower proportion in 2010 and 2007, yet this was not the case. Other factors have also changed for first home buyers including the levels of financial assistance. The state government now provides up front financial assistance for new homes only unlike in 2007 and 2010 when it was also available for established homes.
And as prices are comparable in real terms with late 2010, there are clearly reasons other than investor activity for first home buyers now being such a small portion of the market.