FHBs Get Busy As Conditions Improve

Posted on 26/07/2019  
FHBs Get Busy As Conditions Improve

First-home buyers are becoming increasingly active, accounting for close to 30% of owner-occupier home loans in May, according to new figures. It’s their highest market share in seven years and reflects improvements in affordability and government assistance measures.

FHB activity is expected to continue improving, with falling interest rates, an easing of lending rules and a new federal assistance scheme now in the mix.

The latest data shows the proportion of FHBs signing up to owner-occupier loans reached just under 29% in May — the highest proportion since 2012 and compared to a low of 19.5% in 2015.

Aussie Home Loans chief executive officer James Symond says FHBs are “on the move again”, spurred on by competitive property prices and various incentive schemes.

Overall home loan demand fell slightly in May, according to new ABS data. According to the ABS, 46,600 home loans to owner-occupiers were approved throughout the month of May – a slight reduction (0.1%) on April and a 12.4% decrease year on year. But loans to first-home buyers rose 20% in May.

“The reality is the conditions in the market are very attractive to those looking to buy their first home,” says Mitchell, citing previous declines in dwelling values coupled with low interest rates.

The figures largely pre-date the impact of more recent positive events for real estate, including the Federal Election result, two interest rates reductions, the APRA relaxation of lending rules and the newly-legislated tax cuts.

The Housing Industry Association says affordability is the best it’s been in two decades with mortgage repayments now consuming the smallest proportion of earnings since 1999.

Softer housing markets and a reduction in interest rates combined to improve affordability during the June Quarter, while average earnings have begun to improve modestly, according to the HIA.

“For a home-buyer with an average income purchasing a median priced dwelling, assuming a 10% deposit, mortgage repayments will consume the smallest proportion of their earnings since 1999,” says HIA senior economist Geordan Murray.

“The main reason the HIA Affordability Index today is comparable with the level in 1999, despite house prices rising significantly faster than incomes, is that interest rates are 4.6% today compared with 6.7% in 1999.”

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