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Twice as many Aussies want to buy their first home

Twice as many Aussies want to buy their first home

Deflated prices, cheap mortgages and government subsidies are motivating twice as many people to buy their first property, according to a big bank’s research.

The number of people wanting to buy their first home in the next five years has more than doubled from 7 to 16 per cent in the space of 12 months, according to a survey of 2088 people commissioned by Westpac.

People want a place of their own after spending lockdowns with family, friends and housemates, Anthony Hughes said, managing director of mortgages at Westpac.

“It’s … interesting to see this is now largely being driven by Gen Z, who after being cooped up at home during restrictions are now ready to leave their housemates or parents behind for a place of their own – many of whom might not have considered this a possibility prior to COVID-19,” he said.

“Even though younger generations have been some of the most financially impacted this year, it’s positive that many have really used this time to take stock of their finances and get serious about their long-term goals.”

The survey found 69 per cent of participants currently live with housemates, parents or in-laws. Nearly a third -- 32 per cent -- believed home ownership would grant them a sense of independence.

First time buyers accounted for more than a third of November’s $17.3 billion owner-occupier loans, according to the Australian Bureau of Statistics (ABS), many of them likely taking advantage of the government’s First Home Loan Deposit Scheme.

The debt, prices and timing are right

A variety of reasons are encouraging property floaters to buy a home of their own. About 54 per cent said they don’t want to pay rent anymore, while 39 per cent seek greater financial stability.

Nearly one-in-two were optimistic about buying a property -- even though it would be against the backdrop of a pandemic. About 38 per cent of them credited falling house prices and 24 per cent cited low interest rates.

The COVID-19 pandemic highlighted another changing trend, according to the survey results. People were reconsidering where they would like to live.

About 48 per cent said the pandemic had made them reconsider the type of suburb or area they would like to live in, but the statistic increased to 59 per cent for younger age groups.

“While we’re seeing an increasing interest in properties that offer more space, there’s still a strong desire from first home buyers to live somewhere that’s still only about 20-30 minutes away from the CBD,” Mr Hughes said.

WHERE FIRST HOME BUYERS WANT TO LIVE IN 2020. Source: Westpac

Planning to buy in SydneyPlanning to buy in MelbournePlanning to buy in BrisbanePlanning to buy in AdelaidePlanning to buy in Perth
Up to 10km from the city centreAbout 20-40km from the city centreAbout 10-20km from the city centreAbout 10-20km from the city centreUp to 10km from the city centre
1. Western suburbs1. Eastern suburbs1. Brisbane CBD & inner-city suburbs1. Southern suburbs1. Northern suburbs
2. Sydney CBD & inner-city suburbs2. Northern suburbs2. Northern suburbs2. Northern suburbs2. Perth CBD & inner-city suburbs
3. Northern suburbs3. Melbourne CBD & inner-city suburbs3. Southern suburbs3. Western suburbs3. Eastern suburbs

The shift away from cities could present challenges for first time buyers

The survey’s findings come as 10,500 people left city centres to live in regional areas in the June quarter, according to the ABS.

“In the year to October, combined regional Australian dwelling markets rose 4.8 per cent, compared with a 3.9 per cent lift in the capital cities,” Eliza Owen said, head of research at CoreLogic.

The shift in demand has not been met with enough supply, as fewer properties are listed on the market, leading to prices going up, and potentially locking out locals looking to buy their first property.

“For local first home buyers, declining affordability may become a problem,” Ms Owens said.

“Growth may start to slow in regions that have already seen a sustained upswing, due to such affordability constraints.

“These include areas such as Illawarra, Newcastle and Lake Macquarie, the Gold Coast and the Sunshine Coast, where annual growth rates in houses have already exceeded 7 per cent in the year to October.”

Generally though it’s getting easier to buy

There’s more examples of paying a mortgage being cheaper than rent, according to a report from Aussie Home Loans.

The brokerage firm’s Buy v Rent report compared two mortgage scenarios to median rent, including fixed and variable loans based on Reserve Bank of Australia (RBA) figures.

On variable rate loans with interest at 3.65 percent, it was cheaper to service a mortgage on 33 per cent of houses and 38 per cent of apartments than rent, the report found.

And on loans where interest is fixed at 2.35 per cent for three years, it was cheaper to service a mortgage on 52 per cent of houses and 60 per cent of apartments than to pay rent.

“In many suburbs across Australia, especially those outside the major capital cities, on a monthly basis, it is cheaper to buy than rent,” James Symond said, chief executive of Aussie Home Loans.

Many banks are offering interest rates lower than the RBA figures used in the report’s calculations, creating the opportunity for less expensive repayments.

According to the RateCity database, 31 lenders are offering at least one mortgage rate under 2 per cent, following last week’s historic cash rate cut.

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This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.

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