Australia's property market: Proportion of loans to first home buyers jumps

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Melbourne Property Market
A suburban street is seen in Geelong February 24, 2014. Reuters/Jason Reed

The proportion of first home buyers entering Australia’s property market has arrived at its highest level in five years. New figures from the Australian Bureau of Statistics show that the proportion of loans to first home buyers rose to 18 percent.

Australia’s property market was at a near-all-time low in the previous year, but it was recently lifted after state and federal government intervention. The recent 18 percent rise is comparable to 13 percent in January 2017.

The rally comes as investors increasingly leave the market. In September 2012, the median house price in Sydney was $645,000 and $529,000 in Melbourne. That was the last time the proportion of first home buyers was as high as the latest figure.

The recent figures also show a softening in demand for newly constructed homes. Ensuring the supply of homes available to first home owners is expected to be more of a challenge in the long run.

Based on trend estimates, November saw loans in that sector dropping by $18 million or 0.9 percent. Falls were also seen in loans for homes for rent or sale, dropping by 2.3 percent. The total value of investment housing commitments was relatively flat following a 1.5 percent gain in November, the seasonally adjusted figures show.

A further drop in investor dominance is expected this year. "Our expectation is for the share of investor loans to drift a little lower in 2018 as enhanced macro-prudential measures force domestic banks to decrease their exposure to this group," Sydney Morning Herald reports JP Morgan economist Tom Kennedy as saying.

The ANZ-Property Council of Australia Confidence Index came in at 137.7 in the most recent survey. It was below the record-high of 139.5 struck in last year’s final quarter. The index suggests that a large majority of those who work in the sector is still confident about the future.

David Plank, head of Australian Economics at ANZ Bank, said that the March quarter ANZ-Property Council Survey indicates that sentiment in the property sector is still elevated. He said the report stresses the “ encouraging convergence” between the mining and non-mining parts of Australia with confidence levels in WA rising to the same levels seen in the country’s eastern states.

“Confidence in Western Australia has improved dramatically over the past 12 months. We are getting closer to the end of the post-mining boom adjustment,” Plank said, according to Business Insider Australia. Confidence is broad-based across the country.