First home buyer property hotspots, and the forces driving young investors revealed
The composition of young property buyers has completely transformed along with the suburbs and property types they are targeting, with implications for all prospective property investors.
First home buyer numbers are up 12.4 per cent nationwide and that’s a great market indicator, as a lift in first time buyers often comes at the start of solid rises in home values.
So, where are first home buyer numbers rising and why?
The first thing to understand about first home buyers is that Australia has a lot of people who want to join the property club.
As property ownership rates have fallen over the last two decades, the size of the market of potential buyers (what economists refer to as latent demand) has soared, even as property affordability deterioration has hit them hardest.
Whenever conditions start to look favourable, out come the first home buyers. So what are the favourable conditions they look for?
The very first thing they watch is property prices. If those prices look to be flat or have a slower growth rate (as they have now in Melbourne, Sydney and cities like Canberra, Darwin and Hobart), first home buyers get busy.
The second factor is the employment market. If jobs look to be relatively plentiful and there is a low unemployment rate (currently 4.2 per cent), younger buyers in particular are confident.
The third factor is the number of properties listed on the market. There’s nothing that dissuades first home buyers faster than crowded auctions or negotiating against multiple other buyers.
But when listings are high and price growth is subdued, first time buyers become thick on the ground.
Last year, listings were low nationwide and tightly constrained in Perth, Brisbane and Adelaide. This year, they’re up 4.5 per cent nationally according to PropTrack with a big turnaround in Sydney. In Melbourne, listing volumes in October were at the highest they’ve been since November 2012.
Government schemes pull the trigger
The final factor is government support schemes and as you can see here, government intervention in the form of first home buyer grants and schemes, or other handouts to the property sector, almost guarantee a big response.
Sharp eyed readers will note how the ramp up of these schemes and first time buyer numbers have a strong tendency to come at the start of bumper years for property prices, as they did in 2008-09 and 2020-21.
Most of these schemes have been designed to deal with the “deposit gap”, where buyers can’t save a deposit fast enough to keep up with rising prices.
The federal government’s Home Guarantee Scheme guarantees up to 15 per cent of a property’s value for eligible buyers who need just a 5 per cent deposit to avoid lender’s mortgage insurance.
Dovetailing with federal programs are state-based schemes, like New South Wales’ First Home Buyers Assistance Scheme which gives eligible buyers a full or partial exemption on stamp duty.
When these factors combine, there is usually a noticeable uptick in first home buyers and this year, the place they combined most effectively was in Victoria.
More than a quarter (28 per cent) of buyers who used Home Guarantee Scheme this year were Victorians. NSW and Queensland also saw solid increases.
But which properties are most likely to benefit?
First time buyers can move local markets but before investors dive in, they first need to get a clear picture of what today’s first home buyers are like as they can be quite different to how they were a decade or two ago.
For instance, most of us picture this group as young couples looking to start a family. But the largest cohort at 40 per cent, according to Commonwealth Bank data, are those purchasing alone without a partner, friend or family member.
The other change has been their average age, which has risen steadily over the last two decades to reach 37 years in 2024. That is being driven by increasing time in education (along with rising HECS debts), and rising property prices driving up average deposit amounts.
First home buyer property hotspots
Those factors are unlikely to change anytime soon, which means your average first time buyer will continue to have constrained affordability and tend to favour lower priced options
For single metro buyers, that limits them to units in most markets. While this group do like the inner city lifestyle, they are not particularly fond of high rise towers or busy locations in the CBD.
Instead, investors should look for liveable-sized units in suburbs like Holland Park (QLD), Cannington (WA), Moonee Ponds (VIC), Summer Hill (NSW) and Marion (SA).
For first time couple buyers, the goal remains a house on its own block of land or failing that, a townhouse. That puts into focus three bedroom houses at or below the metro’s median price point. Suburbs like Mansfield (QLD), Hillman (WA), Croydon North (VIC) and Fairfield (NSW) are good places to start your search.
Investors should keep regional markets in their sights, especially those within two to three hours travel time of capital cities. I touched on these recently as being markets likely to benefit from the growth in downsizers and it is a similar effect from first home buyers.
As Executive General Manager - Home Buying at CBA, Dr Michael Baumann put it in a recent report, “We know that on average, regional properties are cheaper than metro-based dwellings and often sit on larger land lots – which could be attractive especially for some customer segments.
“Given the greater level of housing affordability in the regions, these areas often provide first home buyers with the perfect opportunity to take their first step into the market.”
Great examples of regional centres likely to benefit include Bunbury in WA, the Central Coast and Illawarra regions in NSW, Geelong and Ballarat in Victoria and Toowoomba in Queensland.
Investors should factor in first home buyer trends into their plans and be especially interested when their demand is joined by elevated demand from other buyer types and a relative scarcity of suitable properties.
