First-home buyer absence a blessing for investors

First-home buyer absence a blessing for investors
First-home buyer absence a blessing for investors

The absence of first-home buyers in NSW is becoming a major political and housing issue.

But it presents a bonus for investors, given the likely lack of competition in securing some properties at the moment.

Much of the finger pointing has been at the NSW state government following the axing of its first-home owner concessions for the purchase of existing homes. 

The Daily Telegraph has estimated there might be 40,000 fewer buyers this year after Treasurer Mike Baird's tightening of eligibility for the first-home owner grants.

The decison is estimated to boost government coffers by $1 billion a year – more than twice the figure originally budgeted.

The ABS statistics for December last year revealed yesterday just 988 NSW first home owner loans compared to about 4200 in December 2011, when the full array of government grants were available.

But its not just NSW where first- home buyers are pulling back.

The ABS first-time buyer numbers showed nationally they accounted for 14.9% all loans taken out in December – the smallest proportion since 2004 and well below the recent 20% average.

The state govenments that have initiated the shift to new home subsidy rather than continue with the established home subsidy always suggested it would take a while for first-home buyers to adjust to the new incentives.

But while Westpac had expected first-home buyer (FHB) loans to remain soft in December due to the demand shifts associated with changes in state government incentives/stamp duty arrangements, it found actual state mix puzzling.

"We had expected December to show particular weakness in Victoria where stamp duty concessions for FHBs were set to increase substantially in January.

"Meanwhile NSW was expected to stabilise as the unwind from a previous pull forward in demand ended," Westpac notes.

"Instead FHB approvals posted another steep fall in NSW to extremely low levels (lowest since early 1990s), with a sharp fall in Queensland as well but a more modest decline in Victoria.

"WA is the only state showing consistent gains in FHB approvals," Westpac notes.

The decline in first-home buyer finance approvals was mostly offset by an estimated 5% rise in the number of loans to 'upgraders',  with solid gains coming across the big eastern states in particular.

Investor activity softened, with the value of investor approvals falling 2.4% in December after strong gains in previous months.

December’s housing finance figures showed some encouraging signs for the residential building industry, but do not herald a recovery, according to Peter Jones, Master Builders Australia’s chief economist, who added that while there were positives in the figures for builders, the industry was not yet out of the woods.

“Looked at in isolation, today’s figure suggests interest rate cuts from the Reserve Bank may be beginning to gain traction, but any broad based recovery appears a way off.

“In the broader real estate market, the decline in first home buyers that continued in December is a concern given the various incentives across several states to entice them into the market.

“With consumers still reluctant to commit to large investments, the Reserve Bank should give urgent consideration to a rate cut at its March board meeting,” Jones said.

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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