First time buyers rebound into market with home loan surge

RP Data reported that housing momentum continues in 2014, with capital city dwelling prices increasing by 1.2% in January, the figure driven almost exclusively by gains in Melbourne (+3.2%, recovering from 'losses' in recent months), Sydney (+0.8%) and Brisbane (+0.7%).

But the interesting news will be to see how the media chooses to report the rebounding of first home buyers into the market.

There has been an awful lot of commentary about first home buyer numbers falling, with them never to return due to affordability issues and having alternative priorities.

However, soon to be released figures from the Australian Finance Group (AFG) will show first timers surging back into the market.

AFG processed more than $2.5 billion of home loans in January, a large jump of 14% on the prior year.

The percentage of first home buyers jumped from 8.7% to 11.2% in Victoria, while the figure jumped from 21.8% to 24.2% in Western Australia.

First home buyer numbers remain solid in South Australia at 15.5%, while the numbers are clearly lower in the states with no first home buyer grants.

No doubt the resident crash community will instead choose to focus on the nonsensical 3.4% reading for first home buyers in New South Wales; even though it's as clear as daylight that due to the lack of first home owner grant the actual numbers of first timers are not being correctly recorded.

And I say that as someone who is out there in the Sydney housing market every day.

In any case, increasing numbers of first time buyers are choosing to rent where they live and instead buy an investment or rental property as their first step on to the housing ladder. As such, are recorded as 'investors' rather than first time purchasers.

Given the high level of transaction costs in buying and selling property, this can certainly make plenty of sense, especially given that younger generations tend to change jobs (and even careers) far more regularly than was ever the case in decades gone by.

Instead of trading up several times, younger generations may instead elect to get a foothold on the ladder via an investment property, giving themselves to the freedom to rent in different suburbs or take time to travel or work overseas.

Meanwhile the share of fixed rate loans fell to 23.9%, the lowest level in a year, as borrowers anticipate that the interest rate cycle may at last have reached its nadir.

AFG will report that the share of loans for investment purposes in New South Wales has reached the highest level on record at 53.4%.

Demand for property in Sydney in particular is running extremely hot, which will be reflected in more strong capital gains in 2014.

Pete Wargent is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and blogger.

His new book 'Four Green Houses and a Red Hotel' is out now.


Pete Wargent

Pete Wargent

Pete Wargent is the co-founder of, offering affordable homebuying assistance to all Australians, and a best-selling author and blogger.

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