Many first time buyers today show concern about the high cost of entry level property prices and, statistically, they may have a case.
To illustrate this point, Craig James, chief economist at CommSec, in a recent article in Property Observer, outlined the housing affordability issue facing first home buyers in 2012. He compared a block of land in Penrith, in Sydney’s greater west, which was worth £595 in 1962. In today’s money, James calculated that this is equivalent to just over $15,000.
Yet James says the cheapest land that could be found near Penrith in 2012 would cost just over $200,000.
“Of course, land in 1962 can’t be readily translated to 2012 but if purchasing power was kept constant with 1962, a home buyer today would find a block of land (for) around $32,000 – that is only obtainable in country areas like Henty, Braidwood or Kempsey,’ he said.
Despite the affordability issues facing first timers in 2012, it seems they are just as determined as their grandparents in the 1960s to secure a home, if the latest report from mortgage broker Loan Market is any indication.
According to Loan Market, the take up of the federal government’s $1.2 billion First Home Saver Account (FHSA) has soared with a 72 percent increase over a 12 month period.
Loan Market Corporate spokesman Paul Smith said the latest figures from the Australian Prudential Regulation Authority (APRA) showed that as of March, 2012, 35,200 FHSAs had been opened nationwide containing $298.3 million.
Under the FHSA, the government contributes 17 percent of individual contributions up to a maximum amount of $5500 in 2011/12 financial year. There is no minimum annual contribution, but a withdrawal can only be made where contributions of at least $1000 have been made in each of at last four financial years.
After the end of each financial year, a government contribution is calculated on your personal contributions and is deposited into your account, while you will earn interest on your contributions and those of the government – just be sure to check the disclosure statement issued by your financial institution.
“[The FHSA] is a great incentive to assist people trying to save a home loan deposit, with generous rewards on offer from the government,” said Smith.
Smith said interest in the FHSA should increase further as generous first home buyer and stamp duty concessions in some states around Australia are phased out. For more information on the FHSA visit the Australian Taxation Office website.