The statistical illusion surrounding first-home buyers

Posted on 10/09/2014  
The statistical illusion surrounding first-home buyers

Statistics don’t lie - but they can certainly mislead if the right questions don’t get asked. Or, from another perspective, figures don’t lie except when liars figure. This applies the counting of first-home buyers in the market and the exploitation of dodgy data by people with dodgy motives.

 Real estate people and organisations with a vested interest have succeeded in creating the illusion that first-home buyers are no longer active because they can’t afford to buy. This is despite the results of the two major affordability indexes, which say the opposite.

 Headlines continue to shout the Great Australian Dream is extinct and we have a parliamentary inquiry into the affordability issue.

 There is a strong argument that today’s generation of young adults are not interested in the heavy financial commitment of a mortgage. They witnessed their Baby Boomer parents slaving over a hot mortgage while struggling with a young family and have decided to pursue other priorities.

 The evidence from surveys is that Gen Y is a restless lot who would prefer to rent while pursuing lifestyle. Commitments like families and mortgages can wait.

 This, apparently, is reflected in the statistics. Australian Bureau of Statistics data suggests that the market share of first-home buyers has been dropping since 2011.

 For example, the number of first-home buyer commitments as a percentage of total owner-occupied housing finance in late 2011/early 2012 was around 20%. This has slowly declined to 12-13% - according the ABS figures.

 But here’s the thing. During 2012-2013 most states and territories implemented building stimulation strategies. Instead of offering the grants for all types of properties, the grants were available only to first-timers who built a new home or purchased off-the-plan.

 Given that most first-time buyers opt for established homes rather than new ones, this had a huge impact on the numbers of buyers accessing grants. The average price differential across Australia between new and old is $70,000 and it’s well over $100,000 in our largest cities, so $10,000 grants fail to act as an “incentive” to buy new.

 This means most first-home buyers no longer apply for grants because they prefer to buy an established home, which is cheaper and often better located.

If you are looking for affordable properties in our city locations, click here for our "Cheapies with Prospects: City Edition".

 This is evident in statistics from the NSW and Victorian Offices of State Revenue (which distribute the grants). In FY2012, NSW distributed 37,464 grants and Victoria 19,051; in FY2013 NSW distributed 17,297 grants and Victoria 21,898; but in FY2014, the numbers dropped to NSW 7,717 and Victoria 6,115. For NSW, that’s a fall of 79% in two years and for Victoria a decline of 72% in one year.

 WA went against the trend by increasing from 13,959 in 2011 to 22,135 in 2013. But WA still offers a grant ($3,000) for first-timers buying established homes.

The fact that WA, the only state which offers a grant for both new and established homes, has rising figures for first-home buyers, highlights a discrepancy between states. Why does WA have a higher percentage of first-home buyers than all other states and territories?

Many across the real estate industry believe first-home buyers remain active and have begun to query the accuracy of the statistics.

So, are the right questions being asked? Where do the statistics on first-home-buyer numbers come from? Who collects the data?

The Australian Prudential Regulation Authority collects the data from the banks and passes it on to the ABS.

Banks generally only capture what is relevant to their own business, i.e. anything necessary to a loan application. If the loan applicant doesn’t qualify for the first-home buyers grant, the information is not gathered – so many first-home buyers are not recorded as such by the banks.

According to the APRA reporting format, which has not been updated since 2008, 
commitments should be classified to the category "First Home Buyers" only if none of the borrowing parties to the commitment has previously drawn down on housing finance for owner occupation. Nowhere does it say whether the house is new or established, nor whether the buyer has received any form of grant.

With the changes to grant policies across the nation, many first-home buyers who are buying an established property will not qualify for a grant and, therefore, relevant information is not being passed onto the ABS and the data is becoming skewed.

The ABS is obviously aware of this now. In its June 2014 report on Housing Finance, it advises that an investigation is under way to evaluate the robustness of estimates of loans to first-home buyers.

I expect it to discover that there are more first-time buyers out there than the official data shows.

That parliamentary inquiry into affordability will again be shown to be a waste of time and taxpayers money.


Terry Ryder is the founder of




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