Here's more evidence that first-home buyers are supporting Australia's housing market

Photo: iStock
  • According to the Australian Housing Industry Association, growth in loans to first-home buyers have risen to the highest level since late-2012.
  • Data released by the RBA today shows first-home buyer activity is helping to support the cheaper end of the market in Sydney and Melbourne.

Tighter lending standards have been cited as one of the primary catalysts for the ongoing downturn in Australia’s housing market.

In particular, regulatory restrictions have driven a sharp decline in loans to housing investors. Housing finance data from the ABS this week showed investor loan approvals have fallen by 29.7% from their peak.

Loans to owner-occupiers also dipped in June, but recent trends show approvals in that category are still holding up better than investor demand.

And Shane Garrett, senior economist at the Housing Industry Association, says those trends are being supported by increased participation from first-home buyers.

“The first-home buyer share of owner-occupier housing loans increased again during June 2018 and is now at its highest since late 2012,” Garrett said.

In June, first-home buyers accounted for 18.1% of the growth in owner-occupier loans, continuing a trend seen throughout this year.

This chart from the RBA helps illustrate the effect that first home-buyers are having on the market.

The chart was included in the today’s Statement on Monetary Policy and was highlighted on Twitter by Callam Pickering, Asia-Pacific economist at global jobs website Indeed.

The blue lines show house prices for the least expensive housing segments, while the red line tracks the top end of the market.

Clearly, there’s a trend underway in Sydney an Melbourne: The value of cheaper homes is holding up, while more expensive home prices have gone into reverse.

Pickering attributed the shift to the influence of first-home buyers, who have been able to access finance and purchase homes at the lower end of the market.

And the HIA’s Garrett said there are a few reasons for the change.

“Several state governments, including NSW and Victoria, have enhanced their incentives giving the first home buyer segment a new lease of life,” Garrett said.

Furthermore, “in recent years, record numbers of newly built apartments have also come on stream. In terms of design and price point, many of these are particularly suited to first home buyers and have made the purchase of their first home possible.”

The figures tie in with recent trends evident in the Sydney market, with more evidence of recent price falls among higher-end properties valued above $2 million.

You can follow Callam on Twitter here.

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