First home buyers lead housing demand

  • By AB+F Editorial

First home buyers now account for 20 per cent of mortgage lending as tighter lending conditions continue to impact the appetite of investors. 

The QBE Australian Housing Outlook report revealed that more than 110,000 first-time home buyers entered the market last year. 

“Although tighter lending standards, declining property prices and uncertainty related to the economy have deterred some, we still expect a similar number of first home buyers to be getting the keys to their very own property this year,” QBE Lenders’ Mortgage Insurance CEO Phil White said. 

The QBE report also emphasised that: “While record low interest rates and unemployment would typically have continued to fuel property prices, the limited availability of credit has more than offset demand resulting in significant property price declines across many of our capital cities”. 

The strongest outlook for property prices is forecast for Brisbane, where a decade of modest price increases has left the market relatively affordable. 

An oversupply in the market is negatively impacting prices, but it is predicted that a combination of rising population growth and rapidly falling supply will see this situation turn. 

With the Queensland economy also forecast to strengthen, residential price growth is forecast to steadily accelerate through to 2021/22. 

The worst appears to have passed for the Sydney and Melbourne markets, but upside over the next three years remains limited. 

Despite some easing in the assessment of mortgage serviceability by lenders, more rigorous assessments of income and expenses in loan applications are predicted to continue to impact growth in credit and therefore the rate of property price growth for these two cities. 

In both Canberra and Adelaide, with conditions predicted to remain steady, the recent moderate price growth is forecast to continue, although the Canberra median house price is expected to be influenced in the short term by the timing of the introduction of the first home buyer stamp duty exemption from 1 July 2019.

After strong rises over the past four years, price growth in Hobart is now slowing due to affordability constraints.

The Perth and Darwin residential markets are forecast to remain weak in the short term, but by 2021/22, an upturn in property prices is projected to emerge as their dwelling oversupplies are absorbed and the improved affordability provides a trigger for price growth as economic conditions begin to strengthen.

QBE's report comes at a time when latest data from CoreLogic has revealed a surge in housing credit in July which signals that investors could be returning to the market. 

On CoreLogic's numbers, the value of new owner occupied loans were up 5.5 per cent over the month and interestingly even investor loan vlaue up 4.6 per cent. 

CoreLogic's Tim Lawless believes the two rate cuts, easier access to credit and a boost in post election sentiment could be factors underpinning this trend.