Fewer first home buyers as property prices recover

author-avatar By on November 08,2019
Fewer first home buyers as property prices recover

Photo by Cristine Enero on Unsplash

For the first time this year, the monthly number of new loans to first home buyers has fallen, perhaps reigniting housing affordability concerns as property prices rebound.

Released today, the September 2019 household lending figures from the Australian Bureau of Statistics (ABS) show that the seasonally-adjusted number of loans to owner-occupier first home buyers fell from 9,804 loans in August to 9,622 in September.

While small, this 1.9% fall is the first slide in the number of owner-occupier first home buyer loans since December 2018’s 9% dip to 8,519 loans from 9,366 in November 2018.

However, September 2019’s number is still up 6.8% compared to September 2018.

The share of first home buyers in the owner-occupier home loan market – which had been steadily rising since December 2018 – also dipped, falling 0.8 percentage points from its seven-and-a-half-year high of 29.8% in August to 29.0% in September.


The decline coincides with the recent turnaround in average property prices across the country, with CoreLogic’s national home value index for September recording what was the largest monthly gain since March 2017.

National housing values rose 0.9% over the month, before rising another 1.2% over October – now the largest monthly gain since May 2015.

CoreLogic Head of Research Tim Lawless recently foretold this dip, warning last week that first home buyer numbers are likely to subside as prices rise and more property investors enter the market.

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

“Housing prices are once again rising across most regions of the country while growth in household incomes remain sluggish, which will create renewed housing affordability pressures in markets where home values are rising faster than incomes.”

Mr Lawless said property investor activity was likely to ramp up amid more widespread prospects for capital gain and record low spreads between rental yields and mortgage rates.

“Capital city gross rental yields are tracking at 3.7% p.a. compared with three year fixed rate mortgages for investment purposes tracking around 3.8%,” he said.

“In the past, rising home values and greater participation from investors has seen first home buyer activity reduce. ”

The table below displays three low-rate fixed interest-only home loans currently available for investors, featuring a low-rate pick from each of the following categories: The Big Four Banks, The Top 10 Customer Owned Banks, and the Larger Non-Banks. Products sorted by comp rate*

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Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. Introductory rate products were not considered for selection. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term. Rates correct as at 16 January 2020. View disclaimer.

Experienced owner occupiers edging out the rookies?

But a surge in investor loan approvals did not materialise over September, with the ABS data showing a 4% slide in the value of investor loans from August – reversing most of August’s 6.5% gain.

Rather, it appeared to be the more experienced owner-occupiers that pushed some of the first home buyers out of the market in September, with the number of lending commitments for non-first home buyers surging 5.6% in seasonally adjusted terms.

Overall, the value of owner-occupier home loans (excluding refinancing) rose 3.2% in September, taking it up 5.6% through the year, which is the strongest annual growth rate in 20 months.

CommSec Senior Economist Ryan Felsman said the new figures suggest Australia’s housing market revival has staying power.

“The transmission of monetary policy through interest rate reductions to lower mortgage rates is working – contributing to a revival in the Aussie property market,” Mr Felsman said.

“On average, banks have lowered standard variable mortgage rates by around 60 basis points following three-quarter-percent rate cuts by the Reserve Bank.

“Competition between banks and non-bank financial institutions has intensified. Some financial institutions are currently offering home loan rates as low as 2.7 per cent.

“And in further good news for borrowers, the Reserve Bank said in its Statement on Monetary Policy today that ‘the average rate paid could decline further in coming months’ if competition for high quality borrowers continues. “

Economists have widely tipped that the next cash rate cut from the Reserve Bank will take place in February 2020, although some are expecting one to come as early as next month to encourage households to spend big this Christmas.


The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2019) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.

Some providers' products may not be available in all states.

In the interests of full disclosure, Savings.com.au and loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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Dominic Beattie is Savings.com.au’s Content Manager. He has been writing and editing articles on finance, business and economics since 2015, having previously worked as a Senior Journalist at financial research firm Canstar before helping to relaunch Savings.com.au in November 2018. Dominic aspires to help everyday Australians discover simple and effective ways to comfortably manage their finances and save money, without sacrificing their joie de vivre.

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