Just add investors! First home numbers up 25% after ABS statistical revision

It's a major statistical revision: first home numbers are up 25%. 

The most recent data shows the ABS originally recorded 6,061 homes bought in November by first timers, reflecting 11.6% of all loans.

The number has now been revised to 7,627, or 14.6% of total loans, a 25.86% increase.

The ABS has been forced to republish its monthly statistics relating to first home buyers in Housing Finance, Australia.

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Source: Australian Bureau of Statistics

Fairfax Media columnist Michael Pascoe was among the first to suggest the under-reporting by the ABS last June after the RBA dropped their usage of the data.

I wrote in October last year it was continuing worrying statistical blackhole.

Loans to first home buyers caught most of the owner occupied loan commitments made to first home buyers, but not to first time investors who were staying at home while buying their first home elsewhere.

First home buyer statistics are compiled using data from the ARF 392.0 Housing Finance form collected by the Australian Prudential Regulation Authority (APRA) under the Financial Sector (Collection of Data) Act 2001, and are an important as part of analysis of housing demand and affordability.

First home buyers are defined as persons entering the home ownership market as owner-occupiers for the first time.

An investigation by the ABS 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.

The under-reporting only relates to loans to first home buyers. 

The ABS and APRA are now working with lenders to ensure all loans to first home buyers are recorded in the future, regardless of whether they receive a grant or not.

In the interim, the ABS has adjusted first home buyer data for this under-reporting using estimates based on data provided by lenders which have reported correctly. The estimates will be updated over time as more lenders report correctly. 

The underreporting appears to be around 20%.

The First Home Owner Grant (FHOG), introduced on 1 July 2000, is a national scheme funded and administered by the states and territories. Under the scheme, a one-off grant is payable to eligible first home owners. Until October 2012, all first home buyers were eligible for the grant regardless of whether they bought a new or an established home. 

Gradually, states and territories restricted grants to new homes only so that first home buyers who were buying established homes were no longer eligible for the grant.

APRA reporting instructions state that a first home buyer is a borrower entering the home ownership market for the first time as an owner-occupier.

The instructions do not make any distinction between first home buyers who are eligible for a First Home Owner Grant and those who are not. Nonetheless, some lenders' reporting systems only record first home buyers if they are eligible for a grant which may cause under-reporting of first home buyers. 

The ABS acknowledged this under-reporting has progressively impacted on first home buyer statistics from October 2012 as individual states and territories have changed the eligibility of their First Home Owner Grants, generally to cover only the purchase of newly constructed homes. 

States and territories restricted grants to new homes from different dates - New South Wales and Queensland from October 2012; Victoria from July 2013; the Australian Capital Territory from September 2013; South Australia and Tasmania from July 2014.

Loans to first home buyers were therefore underestimated in these states from the dates specified due to some lenders under-reporting.

The ABS suggested originally, the drop in loans to first home buyers from October 2012 had been attributed to the change in grant eligibility reducing the affordability for first home buyers and economic conditions, such as rising house prices and the increase in investment loans for housing. However, subsequent analysis and follow-up with lenders has confirmed that the drop was due, at least in part, to under-reporting by some lenders. 

The ABS estimates that the number of loans to first home buyers which are currently being reported are approximately 80% of the total number of loans to first home buyers.