Positive data. It’s almost everywhere you look lately. Jobs, house prices, new home sales, retail spending and consumer confidence to a name a few. So, why has there been a mass exodus of first-time buyers from most markets?
BY SHANNON MOLLOY
An economist once described first homebuyers as the “key ingredient” to market momentum. When they emerge in force, demand for lower-end properties soars and the folks who own and live in those types of homes are buoyed to move on and up.
It’s that upgrader market that really drives things, he told me. You can have a good number of mums and dads, investors and top end buyers out there, but it won’t make much of a difference without the first-timers in the mix.
Australian Bureau of Statistics figures released last month showed first homebuyers made up just 15.8 per cent of all home loans financed in November – the lowest level since July 2004. And that’s smack bang in the traditionally busy buying period.
On a state-by-state basis, the figures are grim. In New South Wales, first homebuyer numbers are now at a 20-year low and collapsed to 9.5 per cent of all home loans financed in November. In Queensland, the number of first-timers is down a whopping 33 per cent.
Both of these states ditched their First Home Owner Grant (FHOG) schemes last year and replaced them with bonus incentives for people building a new home. These figures indicate they’ve been a resounding failure, as I tipped they might be.
Last September when the Queensland Government axed its FHOG for existing properties in place of a First Home Owners’ Construction Grant for new dwellings, I declared that it’d have “all the success of a one-legged giraffe trying to parallel park a Volkswagen in a swimming pool”.
Who knew it’d be worse. Since launching the scheme, just 126 people have taken up the $15,000 grant. Wow. That’s what I called a failed experiment.
In New South Wales, the FHOG for existing dwellings was also axed in favour of a grant for new builds. Andrew Wilson, senior economist for Australian Property Monitors, believes the collapse of first homebuyer numbers late last year was due to an earlier rush to take up the old grant before it ended.
“Demand (was) brought forward earlier in the year as a consequence of changes to State Government buyer incentive schemes,” he says. “Numbers have collapsed in New South Wales and Queensland.”
Getting into your first home is hard enough since the GFC. Lending criteria is stricter and you need a much larger deposit. A grant for an established property would provide a big help and instill a greater sense of confidence. Plus, it’d almost certainly be for a home near where these people work and play – not a house-and-land package in some manufactured outer suburbs community.
Sure, some first-timers want to live in a brand spanking new house in a masterplanned community… but I dare say they’re the minority. The numbers surely prove that.
I think Real Estate Institute of New South Wales president Christian Payne says it best: “First homebuyers are an essential link in the chain of the entire market and by excluding them it causes a great disturbance.”
In his view, the idea of ditching incentives for established homes in favour of building grants is severely flawed. If governments really want to help, they should get out of the way – and take convoluted planning schemes and outrageous taxation with them.
We’ve got so many pieces of the puzzle in place for market stability and wider recovery. It’s frustrating to see inept politicians making decisions on a whim without considering the wider implications – that first-time buyers will be stuck in a painful rental cycle for longer, unable to kick-start their version of the Australian dream.
The final word goes to Payne, who sounds about as frustrated as me about these grants.
“First homebuyers are a unique category of property consumers and the jump they have to make from a standing start to acquiring a property can be the biggest that any property buyer has to make.
“We need to recognise they need special assistance… it’s imperative that the first homebuyer incentives for the purchase of existing property be reintroduced.”
Shannon Molloy is the deputy editor of Australia Property Investor magazine www.apimagazine.com.au