As investors retreat from Australia's housing market, first time buyers are moving in to take their place

Patrick Riviere/ Getty Images.
  • Australia’s current housing downturn is now one of the largest on record.
  • Price falls may not be welcomed by all, but it’s clear first home buyers are.
  • The share of new owner occupier home loans going to first time buyers rose to a six-year high in February.
  • Along with falling prices, the recent lift, reversing the trends of prior years, reflects the introduction of stamp duty concessions along with less competition from investors.

Australia’s current housing downturn is now one of the largest on record, only surpassed by a handful of periods in the late 1800s and the first half of the 20th century.

While not everyone has welcomed the fall in prices, especially those who bought at the top of the cycle in late 2017, it’s clear that those looking to purchase their first home are sensing an opportunity.

According to Commsec, citing data released by the ABS, the share of new owner-occupier loans going to first home buyers rose to 27.1% in February, the highest level in six years.

The chart below shows the sharp pickup in loans going to first time buyers.


“Lower home prices are certainly being embraced by one group of Aussies,” said Craig James, Chief Economist at Commsec.

Along with falling prices, the spike in recent years largely reflects the impact of stamp duty discounts offered to first home buyers by the New South Wales and Victorian state governments in 2017.

Successful attempts to curb investor activity from Australia’s banking regulator, APRA, in prior years has also helped to reduce competition for first time buyers looking to get on the property ladder.

According to the ABS, the value of new investor lending tumbled 29.1% in the year to February, the steepest drop over a comparable period since early 2016.

“More stringent lending standards for investors [is] making it harder for this group to secure financing, while falling house prices and historically low rental yields lower the appeal of the asset class in general,” said Tom Kennedy, Economist at J.P. Morgan.

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