ABS Under estimates First Home Buyers

Posted on 6/02/2015  
ABS Under estimates First Home Buyers

I wonder what media is going to do with the latest admission from the Australian Bureau of Statistics that it has been grossly under-estimating the number of first-home buyers in the market.

On Wednesday this week the ABS posted an update on its “investigation to evaluate the robustness of estimates of loans to first-home buyers”.

This, it said, found that “some lenders experience difficulty reporting on loans where the buyers do not receive a first home owner grant”.

This, as I pointed out in my column earlier this week (and commented throughout last year, as did other writers on Property Observer), is the nub of the matter. The ABS collects data from the banks on home loans and the method of identifying a loan applicant as a first-home buyer has always been their application for the first home owner grant.  For more information on FHOG click here

If the applicant does not apply for a grant, the system does not identify them as a first home buyer.

Since state and territory governments across Australia stopped providing grants for established properties, the number of grant applications has dropped significantly. The research shows that most first-time buyers opt for an established home (cheaper, usually with more land and often better located) over a new home – and therefore most first-home buyers are no longer receiving grants.

The banks no longer record them as first-home buyers.

Because of the under-estimating of first-home buyers, the ABS statistics on home loans have given the appearance that first-time buyers have almost vanished from the market.

Media has leapt on this as a recurring headline, giving rise to claims that young Australians have been priced out of the market – and then, as a natural progression, generating witch hunts to find someone to blame for the situation. Negative gearing benefits to local investors and the activity of foreign investors have been popular targets.

There have been thousands of articles written in the past 12-18 months about the demise of the Great Australian Dream, all based on a fundamental falsehood, created by the ABS miscount of first-home buyers.

It’s a damning indictment on journalistic standards in this country that so few have picked up on this. Nobody thought to investigate. No one asked the most basic of questions. Media rushed en masse to the cheap and easy headline - the dream is dead because young Aussies can’t afford to buy.

It took a simple phone call from my office in mid-2014 to extract an admission from the ABS that their figures on first-home buyers were wrong – and why they were wrong.

Just how wrong was demonstrated by the recent NAB survey which found that 25% of established homes sold are being bought by first-time buyers and that 24% of new homes are bought by first-timers.

Journalists and editors across Australia should be hanging their heads. But you can be sure none of them will. Nor will the many economists, analysts and commentators who have seized on the ABS figures to justify their attitudes on real estate issues (such as those with an anti negative gearing stance or those opposed to foreign investment in Australian real estate).

“Users are advised to exercise caution in using this data,” the ABS said on Wednesday. That warning has come at least 12 months too late. Not that it will make any difference to some.

I would bet my house that next week there will be more articles in major newspapers repeating the fiction that first-home buyers are at an all-time low. And the week after. And six months from now. People won’t let the facts get in the way of an entrenched attitude or an easy sound byte.

“ABS and APRA will continue to work with lenders to improve data quality,” the ABS said this week. “In the meantime, from the December 2014 issue (to be released on 11 February 2015), estimates of loans to first home buyers will include an adjustment for under-reporting of loans where the buyer did not receive a first home owner grant.

“An Information Paper will be released on the ABS website on 4 February 2015 explaining changes to the method of estimating first home buyers' data and the extent of revisions. 

The ABS will continue to update the method as lenders progressively improve their reporting.”

Too little too late. Australia is awash from misinformation on the real estate industry and the most extreme example has been the first-home buyer miscount and all the column inches of inaccurate comment and posturing it has generated.


Terry Ryder is the founder of hotspotting.com.au




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