Why Sydney's first home buyers are different

Moving house. Photo: Getty Images

For many Australian’s buying their first home is both a rite of passage and what appears to be the start of a journey to build wealth for themselves and their families.

But data from the Australian Bureau of Statistics shows that since a spike in the immediate aftermath of the stock market crash in 2008/9, and the federal and state assistance packages, first home buyers have a declining percentage of total housing finance.

It appears a combination of falling affordability and investors, keen for the tax shelter of negative gearing and the discount of capital gains tax, are outcompeting first home buyers for properties, driving prices higher still.

The situation is so bad that Treasury Secretary John Fraser yesterday told the Senate Budget Estimates Committee that Sydney and upper ends of Melbourne were “unequivocally” in a bubble.

We wondered what the human impact of this might be. So, Business Insider asked Jess Darnbrough, Mortgage Choice head of corporate affairs, if she could mine her company’s extensive loans database to tell us what a first home buyer looked like in each state.

It wasn’t surprising that Mortgage Choice’s data revealed first home buyers only made up 4.39% of sales in New South Wales last month. And the numbers from the last two years of data throws up a stark contrast between NSW first home buyers and those in the rest of Australia.

Here are the three things which stand out in the map above.

Firstly, that the average first home buyer loan size in NSW has been less than in Victoria and Western Australia over the past two years.

Secondly — and the most remarkable piece of information — is that while the rest of the nation is purchasing their first home with high leverage and a deposit of between 5% and 10%, NSW buyers are putting down more than 20%. That’s just incredible. Sure, it helps explain the lower loan size than expected and why there are so few first home buyers in NSW, but it also means that first home buyers in the state are less risky than those in other states.

That’s the third thing you can take away from the data – risk. Take Western Australia’s first home buyers for example. They are earning around the same as a buyer in NSW, but they are putting down a smaller deposit and borrowing more. That’s dangerous and might help explain why there are as many properties for sale in WA as there are in NSW.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.