First-home buyers returning to property market but experts warn European crisis weighing heavily on buyers

Early signs the property market is beginning to improve and that first-home buyers are returning has boosted sentiment among industry analysts, but some experts are warning the market still has a long way to go before it starts reversing its decline.

The positive sentiment was sparked by new home financing figures released by the ABS yesterday that show the number of dwelling commitments for owner occupied housing rose by a seasonally adjusted 2.2%.

In a sign that has some property experts excited, the number of first-home buyer commitments as a percentage of total commitments rose to 16% – the highest level in just under a year and a half. At this time last year, commitments were at 15.9%

But while SQM managing director Louis Christopher says the data is encouraging, he warns it's also prudent to consider the total number of buyers rather than the percentage.

"There are first-home buyers in the market," he says, "but it's only the percentage of the absolute number of buyers. You can see a situation where the total number of buyers is actually falling, even though the proportion increases."

"I do think it's fair to say that housing finance approvals as a measure of demand have picked up, but I strongly believe the market is still watchful about what's happening in Europe."

Yet it's hard to deny the string of positive data that has been released in the past two weeks. Price data from RP Data showed the lowest decline in several months, while SQM's own stock on hand data shows the number of new listings remained flat in October.

Such a result suggests sellers may be starting to draw back from the market, while the ABS figures suggest buyers are coming back. But Christopher warns prospective buyers and sellers need to be wary.

"There is a recovery in housing demand happening at this time, from very low levels, but it is occurring," he says. "Things have improved since the middle of this year, and with the interest rate cut, that is only going to be more encouraging."

"But we still need to be wary about what's happening overseas. We are definitely seeing some changes, but if the market blows up in Europe, there are going to be huge problems for our banks and then any recovery will be off."

This article originally appeared on SmartCompany.