Overvalued, unaffordable property keeping first-home buyers on the sidelines: QBE LMI survey

Perceptions about Australian property being overvalued are significantly higher among first-home buyers then owner-occupiers, the latest QBE LMI Mortgage Barometer shows.

This was one of the key findings of the report, which found an overall improvement in sentiment about the property market with more than a quarter (26%) of Australians looking to buy property in the next 12 months despite nearly one in two believing it to be overvalued.

More than three quarters (76%) of first-home buyers believe property is overvalued with nearly half (48%) believing prices are overvalued by more than 10%.

In comparison just 41% of owner-occupiers and 48% of Australians believe property prices are overvalued, according to the online survey of 1,107 adult Australians responses of which 763 have a mortgage, 680 considering buying property and 399 qualifed as both.

This finding combined with concerns about changes to first-home buyer grants favouring new homes only and another finding from the survey - 69% of FHB respondents worry they’ll never be able to afford their own home – provide insights into why the segment of the market has shrunken in recent times.

Other findings from the report suggest a frustrated first-home buyers market despite recent improvements in affordability.

The report quotes ABS figures showing that since February 2013, the number of FHBs as a percentage of total owner-occupied housing commitments has fallen by more than 5% since September 2012 and now sits at 14% nationally, an eight year low. .

This is due to record low FHB commitments in NSW and QLD (both less than 10%) – a plunge of more than 10% since the grants were replaced, while other states saw FHB commitments rise.

"There are concerns that Victoria will follow suit as it replaces its First Home Owner Grant with a $10,000 newhome owner grant as of 30 June 2013," says the report.

Figures compiled the Real Estate Institute of Australia (REIA) found the number of home loans to NSW first-home buyer in the March quarter totalled 2,647 - 57% lower than a year ago and a 40.6% fall in the March quarter alone.

This was the largest annual decline recorded across the country but in line with a national trend of dwindling first-home buyer demand.

In Queensland, a state which has also cancelled its first-home owner grant in favour of a $15,000 handout for new homes in September last year, home loans to first-home buyer decreased by 43.7% over the March quarter  to 2,557 - the largest quarterly decline across the nation the REIA found.