Great Australian Dream a struggle for many Canberra first home buyers

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The Canberra housing market has enjoyed a resurgence over the past two years fuelled by lower interest rates, an improved economy and restored confidence.

Although local home owners will certainly be pleased at the general 15 percent increase in house values since 2014, higher prices definitely spell bad news for prospective Canberra first home buyers who are now struggling even harder to realise the Great Australian Dream.

The ABS reports that 1776 loans were approved for first homebuyers in Canberra over 2016 which was a decrease of 146, or 7.6 per cent lower than the 1992 recorded the previous year. Although first home buyer numbers fell sharply over 2016, the average first home buyer loan increased by 2.3 percent to $317,643.

Market share is another reflection of performance, with Canberra first home buyers accounting for just 9.8 per cent of total residential lending approved over 2016. This was the lowest result recorded by the local market since 2004 and well below the long-term average of 13.9 per cent.

First homebuyer affordability can also indicated by the difference between the notional average purchase price for a first home buyer compared the Canberra median house price. The First Home Buyer Price Gap Index is now the highest recorded in the series going back to 1992.

The choice of affordable suburbs for first home buyers has also predictably narrowed as house prices have increased recently.  Only Belconnen recorded a 2016 median house price at or below the notional average first home buyer purchase price over the same period.

This is in sharp contrast to 2000 when, using the same benchmarks, 20 Canberra suburbs, or 24.4 per cent of the total, were at or below the average first home buyer purchase price.

With Canberra house prices likely to continue to rise over 2017, the prospect for higher levels of first home buyers remains bleak with the prices gap likely to continue to widen. This will be exacerbated by increasing rents in a tight rental market and the lowest incomes growth on record, constraining savings capacity.

Supply-side initiatives designed to expedite and accelerate the release of residential land remain the clear pathway for improvements in first home buyer market participation – and keeping the dream alive.

Dr Andrew Wilson is Domain Group chief economist. Twitter: @DocAndrewWilson