CHART: Lending to Australian first home buyers is tanking

Photo by Scott Barbour/Getty Images

Loans issued to Australian first home buyers fell to 14.2% – as a percentage of all owner-occupier lending – in March, the lowest level seen since May 2004.

Here’s a chart showing the percentage of owner-occupier loans to first home buyers going back to mid-1991.

Although volatile due to the ABS data not being seasonally adjusted, it’s clear that the proportion is trending lower.

The latest data comes as debate over housing affordability looks set to become a major election battleground between the Coalition and Labor.

The ALP wants to limit the negative gearing tax break to newly built housing, with opposition leader Bill Shorten saying he wants a “level playing field for first home buyers competing with investors”.

The Labor policy would kick in on 1 July 2017.
But prime minister Malcolm Turnbull has committed the Coalition to maintaining the existing policy, arguing Labor’s plan would lead to homes being devalued and less investment.

“Labor’s housing tax plan will deliver a reckless trifecta of lower home values, higher rents and less investment,” said Turnbull. “The key to improving housing affordability is more houses, more dwellings.”

Last week, a Moody’s analyst suggested that while housing affordability deteriorated over the past 12 months, the worst may now be over. He believes housing costs may have peaked due to a pullback in housing prices (something that subsequently reversed in April, according to Corelogic RP Data) along the RBA’s latest rate cut to 1.75%.

Relatively high levels of youth unemployment, higher house prices, along with record-low annual wage growth and interest rates, may be among factors obstructing first home buyers.

Some buyers purchasing for investment purposes, rather than for owner-occupation, may have also contributed to the recent decline.

In dollar value, lending to all owner-occupiers, excluding refinancing, fell by 1% to $13.759 billion in March after seasonal adjustments.

The value of new lending to housing investors rose by 1.5% to $12.007 billion, the fourth increase in the past five months.

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