What the rise of first home buyers means for you

What the rise of first home buyers means for you

The number of first home buyers has finally began to increase thanks to state and territory incentives such as grants and tax concessions, according to data from CoreLogic.

The Australian Bureau of Statistics (ABS) Housing Finance figures for February 2018 showed that while owner-occupied loans were on the rise compared to investor loans, the overall number of housing finance commitments were falling, including first home buyers.

However, CoreLogic data highlighted that although the volume of loans was down on levels in late 2017, it was “33.1 per cent higher than the previous February” specifically for first home buyers.

Nationwide, first home buyers also accounted for 17.9 per cent of all owner-occupier commitments, an increase of 4.6 percentage points from the previous year (13.3 per cent).

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Source: CoreLogic.com.au

NSW first home buyers

  • The number of first home buyers has reached 15.1 per cent of owner-occupier finance commitments in February 2018, rising 7.6 percentage points from February last year.
  • This is the greatest share of owner-occupied loans since October 2012.
  • This increase has been linked to stamp duty concessions becoming available for first home buyers from 1 July 2017.
  • Since these changes were implemented, there have been 18,400 commitments in the 8 month period compared to 10,857 over the previous 8 months.

First home buyer housing finance commitments in NSW:

February 2017

February 2018

Change (%)

1,105

2,246

+103.3

VIC first home buyers

  • The number of first home buyers in VIC account for 18.3 per cent of owner-occupier finance commitments in February 2018, compared to 13.9 per cent from the last year.
  • This increase has also been linked to stamp duty exemptions becoming available for first home buyers from 1 July 2017.
  • Since these changes were implemented, there have been 23,996 first home buyer commitments in the 8 month period compared to 17,522 over the previous 8 months.

QLD first home buyers

  • The number of first home buyers in QLD account for 19.3 per cent of owner-occupier finance commitments in February 2018, compared to 17.6 per cent a year earlier.
  • Throughout February 2018, there were 1,839 first home buyer housing finance commitments, only 3.8 per cent higher from a year ago.

SA first home buyers

  • CoreLogic data highlighted that despite housing values in Adelaide being the lowest of any mainland capital city, “SA has the lowest share of first home buyer activity of any state or territory with 13 per cent of owner-occupier commitments going to first home buyers”
  • This was an increase of 2.5 percentage points from February 2018 (10.5 per cent).
  • Throughout February 2018, there were 443 first home buyer housing finance commitments, 17.8 per cent higher from February 2017.

WA first home buyers

  • The number of first home buyers in WA account for 25 per cent of owner-occupier finance commitments in February 2018, compared to 22.2 per cent a year earlier.
  • Throughout February 2018, there were 1,185 first home buyer housing finance commitments, falling 0.1 per cent from the year before. 

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TAS first home buyers

  • The number of first home buyers in TAS account for 13.9 per cent of owner-occupier finance commitments in February 2018, compared to 13.8 per cent a year earlier.
  • Throughout February 2018, there were 137 first home buyer housing finance commitments, 2.2 per cent higher from a year ago.

It is believed that younger people are moving to Tasmania to purchase a home due to the lower housing prices compared to the mainland. For example, based on Domain State of the Market Report, the median house price for Hobart is $409,592, more than half of the median house price for Sydney ($1,167,516).

CoreLogic Head Researcher, Cameron Kusher, noted that “although the number of first home buyers rose over the year, they remain very low which suggests, at least at this stage, first home buyers in Tasmania are not particularly active”.

NT first home buyers

  • The number of first home buyers in NT account for 19.4 per cent of owner-occupier finance commitments in February 2018, compared to 14.7 per cent a year earlier.
  • Throughout February 2018, there were 52 first home buyer housing finance commitments, an increase of 26.8 per cent from the previous year.

ACT first home buyers

  • The number of first home buyers in ACT account for 25.6 per cent of owner-occupier finance commitments in February 2018, the highest share since October 2009.
  • Throughout February 2018, there were 261 first home buyer housing finance commitments, an increase of 177.7 per cent from the previous year.

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What does this mean for aspiring first home buyers?

CoreLogic Head Researcher, Cameron Kusher, noted that this data highlights the “sensitivities of this important market segment to both affordability constraints as well as market incentives such as first home buyer grants and stamp duty concessions”.

“Despite broadly slowing conditions in Sydney and Melbourne, it’s clear from CoreLogic indices that the more affordable end of the housing markets in these cities are still seeing values rise, at least in annual terms – a likely demonstration of stronger demand from first home buyers. 

“In other cities where affordability constraints are less severe, in the absence of any changes to first home buyer incentives, first time buyers generally remain more active relative to Sydney and Melbourne.

“With demand from the investment segment expected to continue to be weaker than it has over recent years this may afford more opportunities for first home buyers to enter the market,” said Mr Kusher.

It is also important to keep in mind that for those first home buyers looking in Sydney and Melbourne, purchasing property in this post-housing market peak could see you entering into a “negative equity position”.

First home buyers looking outside of Sydney and Melbourne should also consider that those who weren’t able to afford in the two capital cities could soon saturate these more affordable areas.

This in turn will increase competition and affordability as, according to Mr Kusher, “the outflow of people from NSW to other states and territories is continuing to rise which may result in increases in first home buyers elsewhere”.

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How can I get ANZ home loan pre-approval?

Shopping for a new home is an exciting experience and getting a pre-approval on the loan may give you the peace of mind that you are looking at properties within your budget. 

At the time of applying for the ANZ Bank home loan pre-approval, you will be required to provide proof of employment and income, along with records of your savings and debts.

An ANZ home loan pre-approval time frame is usually up to three months. However, being pre-approved doesn’t necessarily mean you will get your home loan. Other factors could lead to your home loan application being rejected, even with a prior pre-approval. Some factors include the property evaluation not meeting the bank’s criteria or a change in your financial circumstances.

You can make an application for ANZ home loan pre-approval online or call on 1800100641 Mon-Fri 8.00 am to 8.00 pm (AEST).

Monthly Repayment

Your current monthly home loan repayment. To accurately calculate how much you could save, an accurate payment figure is required. If you are not certain, check your bank statement.

Interest Rate

Your current home loan interest rate. To accurately calculate how much you could save, an accurate interest figure is required. If you are not certain, check your bank statement or log into your mortgage account.

What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

How much is the first home buyer's grant?

The first home buyer grant amount will vary depending on what state you’re in and the value of the property that you are purchasing. In general, they start around $10,000 but it is advisable to check your eligibility for the grant as well as how much you are entitled to with your state or territory’s revenue office.

Does Australia have no-deposit home loans?

Australia no longer has no-deposit home loans – or 100 per cent home loans as they’re also known – because they’re regarded as too risky.

However, some lenders allow some borrowers to take out mortgages with a 5 per cent deposit.

Another option is to source a deposit from elsewhere – either by using a parental guarantee or by drawing out equity from another property.

How much deposit do I need for a home loan from ANZ?

Like other mortgage lenders, ANZ often prefers a home loan deposit of 20 per cent or more of the property value when you’re applying for a home loan. It may be possible to get a home loan with a smaller deposit of 10 per cent or even 5 per cent, but there are a few reasons to consider saving a larger deposit if possible:

  • A larger deposit tells a lender that you’re a great saver, which could help increase the chances of your home loan application getting approved.
  • The more money you pay as a deposit, the less you’ll have to borrow in your home loan. This could mean paying off your loan sooner, and being charged less total interest.
  • If your deposit is less than 20 per cent of the property value, you might incur additional costs, such as Lenders Mortgage Insurance (LMI).

Savings over

Select a number of years to see how much money you can save with different home loans over time.

e.g. To see how much you could save in two years by switching mortgages,  set the slider to 2.

How much deposit do I need for a home loan from NAB?

The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.

Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.  

Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.

What is a low-deposit home loan?

A low-deposit home loan is a mortgage where you need to borrow more than 80 per cent of the purchase price – in other words, your deposit is less than 20 per cent of the purchase price.

For example, if you want to buy a $500,000 property, you’ll need a low-deposit home loan if your deposit is less than $100,000 and therefore you need to borrow more than $400,000.

As a general rule, you’ll need to pay LMI (lender’s mortgage insurance) if you take out a low-deposit home loan. You can use this LMI calculator to estimate your LMI payment.

Are bad credit home loans dangerous?

Bad credit home loans can be dangerous if the borrower signs up for a loan they’ll struggle to repay. This might occur if the borrower takes out a mortgage at the limit of their financial capacity, especially if they have some combination of a low income, an insecure job and poor savings habits.

Bad credit home loans can also be dangerous if the borrower buys a home in a stagnant or falling market – because if the home has to be sold, they might be left with ‘negative equity’ (where the home is worth less than the mortgage).

That said, bad credit home loans can work out well if the borrower is able to repay the mortgage – for example, if they borrow conservatively, have a decent income, a secure job and good savings habits. Another good sign is if the borrower buys a property in a market that is likely to rise over the long term.

Does Australia have no cost refinancing?

No Cost Refinancing is an option available in the US where the lender or broker covers your switching costs, such as appraisal fees and settlement costs. Unfortunately, no cost refinancing isn’t available in Australia.

Can I change jobs while I am applying for a home loan?

Whether you’re a new borrower or you’re refinancing your home loan, many lenders require you to be in a permanent job with the same employer for at least 6 months before applying for a home loan. Different lenders have different requirements. 

If your work situation changes for any reason while you’re applying for a mortgage, this could reduce your chances of successfully completing the process. Contacting the lender as soon as you know your employment situation is changing may allow you to work something out.