Will The First Home Buyers Scheme Effect Property Prices?

The Morrison Government’s first home loan deposit scheme is due to start in January. Could an influx of first home buyers raise prices further?

CoreLogic Research Director Tim Lawless recently wrote an article in The Real Estate Conversation. He cited ABS housing data for August reporting the highest volumes of first home-buyers, taking out owner-occupier loans since early 2012. 

The latest data shows that market segmentation is already up to just under 30% for first home buyers. 5% above the decade average. With such a large segment of the market made up by first home-buyers and the first-home scheme just around the corner will they be a factor in rising prices?

Why Now For First-Home Buyers?

First-home buyers capitalising
First-home buyers capitalising on more favourable buying conditions

Multiple factors have come together to make the property climate “just right” for first home buyers. The two-year price plummet nationwide has certainly made the market more palatable for those looking to break in. Combine that with record low-interest rates and eased lending restrictions and you have the perfect ingredients for your first home.

Mr Lawless also cited less fierce competition from investors with quite a noticeable absence in mortgage demand since 2015 peaks of 43%. The ABS August statistics reported that only 26% of mortgage demand was now taken up by investors a stark contrast at 8% below the decade average.

In his article he also pointed out that the NT and WA were the leaders in first home-buyer stats at 45% and 37% respectively. A key driver being the fact that both States were leading the nation in house price falls making them an affordable option for first timers.

3 Key Drivers For First-home Buyers:

  • Improved affordability due to market decline
  • 3 Consecutive Interest Rate Cuts
  • Eased Lending Conditions
What’s driving more Australians to turn the key of their first home?

First-home Scheme and Impact on Housing Affordability

The consenus on the effect first-home buyers have already had on the market compared to when the scheme is introduced is seemingly split.

Mr Lawless in another report stated that the scheme was unlikely to have a substantial impact on markets due to it’s cap of 10,000 buyers, less than 10 percent of first-home buyers in the past year.

On the flipside, we have senior writer for The Australian Financial Review John Kehoe who recently wrote an article titled “First-home loan scheme to increase prices”. Kehoe cites “property industry professionals” as stating that the January scheme will put “upward pressure on prices”.

The article went on to say that due to pre-existing demand prices should only see a marginal growth from the scheme.

Are First-home Buyers Here to Stay?

Tim Lawless – Credit CoreLogic

“Looking forward, it’s likely first-home buyers will reduce as a proportion of overall market activity.” – Tim Lawless

The disparity between stagnant incomes and rising house prices is likely to slow down the influx of first timers as affordability pressures in the market begin to return. This in combination with reigniting investor activity as capital gain prospects begin to widen and interest rates remain low.

The Researcher Reflection

Despite the media stir-up first timers should remain moderately sturdy, especially around middle and outer ring suburbs where prices are more affordable. As we see prices continue to rise an evening up between first-timers and investors is likely. Favorable buying conditions across the country will more than not see continued growth through the first half of 2020 with markets like Adelaide and Brisbane predicted to get increased attention as buyers look to more affordable purchases. The success of certain areas over others will be impacted by their stage in the property cycle which can be better understood in this handy article from last month.