First-home buyers hit record market share

Posted on 5/02/2009  

Mortgage sales to first-home buyers rose to an all-time high market-share in January. Soft prices, low interest rates and government handouts have created unprecedented opportunity. 

According to mortgage broker AFG, first-time buyers comprised 25.8% of all mortgages arranged in January. This is a huge increase on June 2008, when first-home buyers made up only 10.6% of the market. First-time buyers were most prominent in New South Wales (30.5%), Western Australia (26.7%), Victoria (25.3%) and Queensland (24.7%). 

AFG says it first noted a surge in first-home buyers in its early December Mortgage Index – a trend confirmed by the ABS in its official data published on 14 January. “The surge is now in its third month and shows no signs of stopping,” AFG says in a media release. 

Loan to Value Ratios (LVRs), which have been rising steadily over the past 12 months, also hit a record high of 72.5% in January, up from 62.7% in January 2008. An LVR expresses the average mortgage as a proportion of the average house price – and typically rises when property prices fall and/or when more first-time buyers (with smaller deposits) enter the housing market. 

Mark Hewitt, AFG’s general manager of sales and operations, says: “Younger people with reasonably secure jobs have become an important force in the property market in the past few months. For many of them it’s a case of ‘what recession?’  

“While other parts of the market are suffering, for them the opportunities are unprecedented – generous government hand-outs, soft prices and interest rates which are now at a 30-year low.” 

Overall, sales of mortgages fell from $2.2 billion in December to $1.9 billion in January. While January sales have tended to be higher than December in the past, last month’s slew of bad economic news saw more buyers staying at home. Investors as a share of total property loans have fallen from 31% in September to 26.5% in January. 

“However Tuesday’s rate cut by the RBA and the $42 billion Federal Government spending package is expected to stimulate increased activity in February and March,” Hewitt says. 


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