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First home buyers get back in game – share of loans rises to 11.9%

Except when it was each of us seeking a first home, it has never been tougher to get your first home, even though the interest rate conditions have never been better. There was a loud cheer in most of the market when the August 2017 data showed that first home-buyers had managed to win an 11.9% share of the value of all home loans. This is despite house prices remaining high.

For some time now there has been ongoing reporting of the challenge faced by first home-buyers in getting a deposit together, getting a loan approved and then actually submitting the winning auction bid. That challenge is far from over, but thanks to tighter prudential controls on investor loans and the stamp-duty concessions for first home-buyers, the trends are in the right direction.

The chart below shows the value of loans over the last four years. Along the bottom we can see the recent rise in the total value of loans to first time borrowers, with the two lines above – loan values for investors and owner-occupiers also relevant.

fig 13

To go straight to the dashboard and take a closer look at the data, click here.

At AUD3.03 billion in August 2017, the value of loans to first home-buyers has never been higher, although in the past, they have accounted at times for far more than 12% of total loan values.

The other factor to note is that since the start of 2017, the value of loans to investors has fallen, while those to owner-occupiers have grown quite strongly. In money terms, they have never been higher in fact. In large part, this is due to the big rise in loans to first home-buyers, but regardless, its owner-occupiers over investors right now.

The chart below, from Greg Jericho of The Guardian, places the role of first home-buyers in a different context. The proportion of new loans they account for, especially in NSW and Victoria, is staggering right now.

fig 14

Isolating NSW alone, Jericho provides some excellent insights, including in the following chart, which shows that although the value of new loans written has remained on average over the last year, the number has exploded, growing by 80% compared with the prior year.

fig 15

In a housing market that looks more fragile and fragmented than for a number of years, first home-buyers are carrying their share of the load.

Turning quickly to approvals, we can potentially observe that the role of first home-buyers is having an effect in the market. Approvals for new houses punched up to 11,276 for August 2017, their highest monthly volume for the four years shown in the chart.

fig 16

To go straight to the dashboard and take a closer look at the data, click here.

The strength in approvals of houses means that for the year-ended August, approvals totaled 114,575 separate dwellings, just 2.3% lower than for the prior year, while the boom was still kicking along. However as the chart above shows (and the one below), approvals of 4+ Storey apartments have plunged 29.0% over the same period.

fig 17

To go straight to the dashboard and take a closer look at the data, click here.

We may need to be cautious about saying so, but it does appear that first home-buyers prefer a house over an apartment. At least, that’s what the data suggests.

Posted Date: October 26, 2017

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