The first home buyer conundrum and why other buyer segments matter: Hotspotting's Terry Ryder
EXPERT OPINION
It’s time we stopped treating first-home buyers as a protected species and considered the importance of other cohorts in the housing market.
It’s become a kneejerk response in mainstream media to cry outrage whenever property prices rise, with concern for first-timers as the justification for strident headlines.
Media seems to never tire of the “young Aussies have been priced out of the market” storylines. I have a database of articles going back decades showing that this theme has been bashed by media constantly over the years.
The current claims that young adults are doomed to lifetime of renting are a replay of the headlines from last month, last year, two years ago, five years ago, 10 years ago and indeed 20 years ago.
Rise
Were they justified and accurate, the past 18 months would not occurred. Over the past year and a half, we’ve seen record buying activity by first-home buyers.
The spectacular price growth seen in that period has been driven, not by investors, but by first-home buyers and other owner-occupier buyers. Helped by a high level of government assistance, they have pumped up demand at a time of low supply, hence the big price rises.
Rising prices make it harder for first-timers to get into their local markets, but otherwise there’s never been a time when they’ve had so much in their favour.
There are multiple federal and state schemes provided easy access to finance, cash hand-outs and special concessions on costs like stamp duty. The low level of mortgage rates is a bonus.
Australia is already doing all that it needs to do to smooth the path for budding young buyers.
Beyond that, how about some consideration for other types of buyers.
What about second-time buyers? Consider this scenario: a young couple buys a small apartment as their first home – it’s affordable, well located and suits their lifestyle.
Then they decide to start a family and they need to upgrade to a larger dwelling. For most, this means selling the existing home and buying something more appropriate.
They’re still young, aspirational Aussies seeking to navigate the property minefield of high competition, low supply, rising prices and prohibitive buying/selling costs. But what assistance does this country offer them? The answer is: nothing.
Once they’ve bought that first home, they cease to be worthy of consideration or assistance. They’re on their own.
So, what about down-sizers? Older Australians rattling around in the family home, with the kids grown and out in the world. The family home is now inappropriate to their needs – it’s too big and it costs time, energy and money to maintain. Ideally, that older couple or individual would like to downsize – sell the big house and buy a comfortable low-maintenance apartment perhaps.
Many older Australians would like to take that step and we keep hearing politicians encouraging them to do so, to free up those big homes for young families.
But many don’t take that step. Why not? Because the costs are prohibitive.
Selling a home and buying another can easily cost $50,000, $100,000 or more in stamp duty, agents’ commissions, legal fees, relocation costs and more. When you’re retired or approaching retirement, those costs are deal-breakers.
I’ve considered making the downsizing decision myself. I won’t be doing it any time soon because the costs are ridiculous.
Politicians urge older Australians to make this move, but how much assistance is provided by them in terms of easing the cost burdens? Exactly zero.
And how about some incentives for investors to get active in the market. We have a chronic shortage of rental properties in most locations across Australia because of a series of measures by politicians and bureaucrats over the past 5-6 years that have massively discouraged investors. Australia needs to change course and encourage investors to buy homes and make them available for rent.
We don’t need to stop the world and reorganise how our markets work because potential first-home buyers are having a whinge about how tough things are for them. They already have huge levels of government assistance available to them.
Rather, we should be considering ways to help other cohorts in the housing markets who are equally worthy of assistance.