First-home buyers rush back into market over year to January: ABS

First-home buyers have returned to the housing market at the fastest pace in 10 years, new figures show, as interest rates fall and larger home loans are on offer.

The value of new home loans granted to first-home buyers soared 46.2 per cent to $4.19 billion in January, compared to a year earlier, according to official figures.

Some 9945 first-home buyers took out loans in the month, up 25.5 per cent from a year ago.

The jump comes amid a remarkable house price recovery in most capital cities during recent months, after the clear federal election result, a string of interest rate cuts and regulatory moves to let buyers borrow more money by changing the serviceability test on mortgages.

Owner-occupiers have been driving the recovery, with pent-up demand strong after buyers held off making purchases during the earlier market downturn.

The total value of loans to owner-occupiers rose 26.9 per cent in January, from a year earlier, to $15.03 billion.

Both types of buyers have been coming back into the market since the May election. Loans to first-home buyers are up 34.5 per cent since May, while other owner-occupiers are up 29.4 per cent.

First-home buyers have been rushing to buy in inner and middle-ring suburbs before rapid price growth pushes them further out of reach.

Several incentives are on offer to first-home buyers, including stamp duty exemptions and concessions for lower-priced properties in NSW and Victoria, and a federal government scheme to help buyers purchase modestly priced properties with only a 5 per cent deposit.

Domain economist Trent Wiltshire said the rebound has been driven by owner-occupier borrowers and first-time buyers in particular, although investors have bounced back too.

“The changes to bank lending rules, combined with lower rates, meant first-home buyers in particular could borrow more,” he said.

“First-home buyers have been trying to get into the market before prices rose too far, particularly in Sydney and Melbourne.

“But the first-home buyer activity also has the effect of pushing up prices as well. In that sense, the First Home Loan Deposit Scheme is not well timed, as it will contribute to price rises at the lower end of the market.”

The first-time buyer bounce was strongest in the ACT, up 84.7 per cent from a year ago. Since mid-last year, first-home buyers in the ACT have been exempt from stamp duty if their annual household income is less than $160,000.

Victorian first-time buyers jumped 65.4 per cent over the year, while NSW rose 50 per cent.

Commonwealth Bank senior economist Kristina Clifton said lending for housing has been rising strongly since the interest rate cut in June last year.

“The monthly flow of lending to owner‑occupiers is back above its previous peak,” she wrote in a note to clients. 

“The pick‑up in owner‑occupier lending has been strongest in NSW and Victoria, with lending in both these states back above their previous peaks.”

But she warned jitters over the spread of the coronavirus and its effect on the economy could negatively affect the housing market.