Stand up and be counted: Are the FHB stats a true reflection?
According to data released by the ABS earlier this week, the amount of loans financed to first home buyers in September recorded a new low at only 12.48%.
This week’s exclusive piece is putting the spotlight on this data and whether or not it’s a true reflection of what’s going on in the market.
Many property forums are arguing that first home buyers are no longer ticking the first home buyers box, and therefore skewing the statistics.
Todd Hunter of wHeregroup says he would like to know who came up with this data and where it came from on his latest blogpost.
Professionals active in the property sphere were asked the following question.
Do you agree with the first home buyer statistics? Why or why not?
Paul Biller – Principal of 1st City Hasemer & Caldwell-Eyles
FHB LEVELS PLUNGED SINCE THE GOVERNMENT REPLACED FHB GRANTS WITH INCENTIVES
Yes, I agree with these statistics. There is no benefit to a first home buyer no longer ticking the first home buyer box.
Australia’s housing market is experiencing its strongest run in years. Investors and changeover buyers are being drawn back to the market following interest rate cuts and the positive outlook for housing. Yet despite historically low interest rates, rising prices are raising fresh concerns about housing affordability for first home buyers. Just one-in-eight borrowers were first home buyers in September - the lowest proportion in more than two decades.
First home buyer levels have plunged recently in some states by more than 10% since the government replaced first home owner grants with incentives to buy only brand new properties, however the bulk of first home buyers are still buying established dwellings because they are more affordable.
When the government announces it is putting an end to an incentive and telegraphs it, a lot of home buyers bring their plans forward. The result of the rush to get in before October 2012 means that many buyers who would have been in the market now, purchased last year instead. As a result of the new policies, the Australian Bureau of Statistics shows that first home buyers are becoming scarcer. There is too much competition with investors who are looking at the same properties and taking the opportunity to borrow with the lowest interest rates in 50 years and with a shortage of rental accommodation pushing up yields.
Other factors include stamp duty and the size of deposit required and ability to save for it. While monthly mortgages were becoming more affordable, first home buyers were struggling to put down a deposit as property prices continue to rise.
Jessica Darnbrough - Spokesperson for Mortgage Choice
ABS STATISTICS COULD BE SIGNIFICANTLY LOWER THAN WHAT IS HAPPENING IN REALITY
The data from the Australian Bureau of Statistics is as true as it can be. The Australian Bureau of Statistics report on the data that is available to them.
That said, today, some of the states have removed the first home owners grant for established dwellings. As a result, many first home buyers who are purchasing existing properties do not have to declare that they are buying for the first time.
According to a recent survey by Mortgage Choice, 70.9% of recent first home owners said they had purchased an established dwelling. With this in mind, it is reasonable to assume that the first home owner numbers as reported by the Australian Bureau of Statistics could be significantly lower then what is happening in reality.
Next page: Kevin Lee and Ben Kingsley
Kevin Lee - Buyers agent at Smart Property Adviser
FORGET THE 12.48% - WHO, WHAT, WHERE AND WERE THE OTHER 87.52%?
It never ceases to amaze me that first home buyers regularly receive a disproportionate amount of media and government attention when compared to the actual percentage of the total property market that they account for.
Could I be so bold as to suggest that this group is a 'political football' and therefore the recipient of so much government 'spin'. But they will never, ever save the country - how can they?
Forget the 12.48% who bought their first property - who, what, where… were the other 87.52%?
That's the number one question our politicians, policy makers, bureaucrats and property professionals should be focused on. With the right assistance/incentives this second group could (and should) have a much larger impact on the Australian economy.
However all the press is devoted to the precious few home buyers who are having their first go at becoming a rate payer. Weird isn't it!
By definition, most of this 12.48% won't do much for the next six or seven years. Sure they'll struggle to make their monthly repayments, buy some furniture, have a kid or two, maybe buy a new car, and send their kids to schools in the area.
Don't try to tell me that the other 87% of purchasers don't contribute in the same way?
It matters nought whether the purchaser is an owner occupier or investor - the end result is always the same.
Whether you purchase a property to live in yourself - or for someone else to live in - there's still a household to be formed, things to buy, kids to go to school, and people who will live a life there.
Let's face it, governments devoid of any real ideas, balls or brains created incentives for a minority group to stop renting and purchase their own home. First home owner grants of $7,000, then $10,000 then $14,000 ... but wait there's more. Buy now and we'll also throw in free stamp duty - in NSW that's a potential saving of another $23,000.
So the government spends millions of dollars to entice maybe 100,000 extra people to join this minority group. Why? Because this is what financially un-educated people do.
Smart people - those people with a financial education - set goals and take the necessary action to reach those goals. They get other people to pay off their debt for them.
Little do these bureaucrats know that many savvy first time buyers were in fact buying their first investment property, all they had to do was comply with the rules and live in the property for a very short period.
If these bureaucrats had any clue, they would incentivise all people who are trading up or down by removing (or at least reducing) the two most insidious taxes ever created: stamp duty and land tax. The average Sydney couple buying a modest home or investment property for $700,000 pays just over $27,000 NSW stamp duty for the privilege.
That's equivalent to furnishing that property, a pretty special holiday or a whole mouth full of dental work. Our economy would be so much stronger if that $27,000 was spent on goods and services for the individual, instead of employing another pencil pusher.
They were supposed to eliminate those state based taxes with the introduction of the GST, but our governments are like heroin addicts - their addiction to the tax is on the same level; they will do anything to get it and just can't give it up.
Ben Kingsley – Chair of Property Investment Professionals of Australia (PIPA)
THIS DATA IS NOW OVER SIX WEEKS OLD AND THE MARKET FOR FHB IS ON THE IMPROVE
I see no beneficial reason or hidden agenda by the ABS to alter the statistical reporting of this data. The ABS do a great job in capturing and reporting this data on a monthly basis and have done so for many years now. This housing finance series attempts to enumerate all providers in its scope of collecting this data and in the early 2000s the collection of this data was handed over the Australian Prudential Regulatory Authority (APRA), so the coherency and consistency of the data has remained robust over this period.
The claims that first home buyer borrowers are choosing not to report their status as first home buyers on their loan applications to lenders doesn't make sense to me. First home buyers have access to grants and/or incentive scheme across each state and territory at the moment, and lenders are heavily involved in the implementation of these grant and incentive as part of the lending application process, so first home buyers are almost certainly known to lenders and reported as such in this data in my view.
Within our business in Melbourne, our observations of the soft activity by first timers in the market and also the number of first home buyers we are arranging finance and providing buyers agency services for supports this September reading. However we need to recognise this data is now over six week old and the market for first home buyers in definitely on the improve and I'd expect this number will be the bottom of this cycle for first home buyers and the remainder of the year we will see an improve and 2014 I see even further growth in first home over grant numbers active in the market.
Nest page: Todd Hunter and Andrew Wilson
Todd Hunter - Director at wHeregroup
THERE IS NO WAY TO ACTUALLY GAUGE WHO IS A FIRST HOME BUYER AND WHO IS NOT
It’s being bantered all over the press everywhere, the property market has out priced first home buyers and they have magically disappeared from the market place. They are gone and don’t look to return anytime soon. Are they?
I personally would like to know who came up with this data and where it came from. In New South Wales since the first home owners grant and the stamp duty concession was abolished, with the exception for new properties, there is no way to actually gauge who is a first home buyer and who is not. There are no forms to fill in, no boxes to tick on the loan application form, no sections to fill in on the land transfer. So I ask, how do they know this?
It sounds like some fancy media or marketing hype that someone has conjured up and now the media herds are running with it like no tomorrow. For those who have ever dealt with the wHeregroup, you would have had contact with one or both Rebecca’s. Well Rebecca - my personal assistant - has recently purchased her first unit. Now this unit was in the Sutherland Shire but was not new. Rebecca wanted to live in the Shire so rather than buy a new house and land package in the western suburbs, where there is available land, she opted to pay the stamp duty and live where she wanted to live. As the $7,000 grant is no longer available, her transaction went through undetectable as a first home purchase. In the past I have exposed inaccuracies in the stats and supposed property indexes. I wrote a blog on the median house price and how the figures can be easily skewiff.
Well it appears that this fictional statistic has also been skewiff, and it’s such an easy fix. All we need is a box ticked on the land transfer so the type of purchaser can be calculated correctly.
I do agree, however, that it is becoming increasingly more difficult to first home owners to get into the market; especially in the Australia’s capital cities, but come on lets not over exaggerate things, lets find solutions. It may mean that first home buyers may need to take a different tact in investing in property, whereas they may have to buy a cheaper investment property or two in large regional areas where house prices are still around the $300,000 – $350,000 mark and increase their wealth in those properties. So that when they sell they have a much larger deposit for their home. As the game changes so must your game plan. But one thing’s for sure, what we certainly don’t need is a whole bunch of negative inaccurate hype deterring our future generation from buying property.
These comments originally appeared on Todd Hunter's blog.
Dr Andrew Wilson - Senior Economist for Australian Property Monitors
Latest ABS data seems to indicate increased underlying barriers to home ownership 
trengthening housing markets and rising prices can be bad news for first home buyers waiting in the home ownership queue.
With prices rising faster than savings this can lengthen the queuing duration for first home buyers or alternatively necessitates revised property type and location choices.
Increased investor activity can also be a barrier for first home buyers as these groups tend to compete with each other for similar properties.
Latest ABS home loan data seems to indicate increased underlying barriers to home ownership and have fuelled the flames of first home buyer doomsaying. But a closer look at the data reveals a more positive environment, particularly on a local market-by-market basis.
The ABS reported that the proportion of first home buyers approved over September in New South Wales is the lowest on record at just 4.1 percent market share of home purchase loans. No real surprise here as significant first home buyer activity has been brought forward over the past two years as a consequence of state government changes to first home buyer incentives.
Similarly in Queensland low first home buyer activity is a consequence of demand brought forward over the past year due to changes to local incentive schemes. And Victorian first home buyer activity is also predictably waning following a recent surge in activity as the local state government followed the lead of other states and changed its incentive programs.
First home buyer activity in other state markets however remains consistently alive and well. In Western Australia the proportion of first home buyers in the market is a nation-leading 20.6 percent and clearly above the long-term average for that state. Similarly in South Australia the proportion of first home buyers at 14.7 percent remains above the long-term average for that state.
Tasmania first home buyer activity over September remains just below the long term average market share.
Expect first home buyer activity to gradually recover in New South Wales, Victoria and Queensland as underlying demand increases driven by Australia’s ever-resilient aspiration for home ownership.
Property Observer is looking into how ABS compiles this data and will publish a follow-up piece.