More than half of first-home buyer hopefuls plan on buying this year despite soaring property prices

First-home buyers’ dreams of home ownership have not been crushed yet, new research shows, despite rising prices in most capital cities around Australia.

More than half (51 per cent) of first-home buyer hopefuls plan on buying property in the next 12 months, according to ME’s latest quarterly property sentiment report, which surveyed 1000 Australians in the property market in January.

That’s an increase from 38 per cent in the second quarter of 2019, when the report began. 

ME’s home loan general manager Andrew Bartolo said rising prices had invoked FOMO (fear of missing out) as they tried to get onto the property ladder.

“As property prices were falling there’s a bit of latency happening the market … it’s also nudging them into the market with the FOMO effect,” Mr Bartolo said. 

“Given the wealth effect of owning property, they see it not only as a place to live but an investment that will appreciate in value.”

McGrath Ryde selling agent Daniel Hennessy said the first-home buyer market had become very competitive with a low number of listings, low interest rates and the strong uptake of the government’s first home deposit scheme.

“The competition and the number of first-home buyers within the marketplace is exponential,” he said. “The supply levels are not there to cater in my area [Ryde, West Ryde, Denistone East].”

He said while many first-home buyer hopefuls wanted to enter the market this year, it could prove to be difficult as they rushed to get into a rising market.

“Their aims could be a little unrealistic in the inner-city market … there’s probably going to be a few disillusioned first-home buyers based on supply levels.”

McGrath San Souci selling agent Trent Tarbey noted a similar sense of urgency in the first-home buyer market of Sydney’s south.

“First-home buyers are quite optimistic and there is a sense of urgency. Obviously with the rising market they don’t want to miss the boat,” Mr Tarbey said. “I wouldn’t say they’re desperate but there is a sense of worry.”

CoreLogic’s head of residential research Eliza Owen said while the first-home buyer guarantee may “marginally boost” demand from buyers, rising property prices would lock more out.

More than half (55 per cent) of respondents also predicted prices would rise over the next 12 months, an increase from the 38 per cent who predicted price rises in the third quarter last year.

All major cities recorded a more positive outlook on prices than the previous quarter despite 92 per cent agreeing that housing affordability was a big issue in Australia.

More Victorians predicted strong house value growth than those in any other state, with 67 per cent of respondents predicting prices would go up, a 10 percentage point jump from last quarter’s prediction.

These positive house price expectations were seen across owner-occupiers, first-home buyers and investors.

While investor optimism dipped slightly and was on par with owner-occupiers, the survey found the property market’s sentiment had improved overall for the third quarter in a row.

Australians have become less concerned about tight credit policies with only 6 per cent agreeing that it was a worry, down from 16 per cent from the past quarter.

ME’s report also tracked the perception of choice in the property market with almost half (46 per cent) believing there was not enough choice. That figure rose to 57 per cent among first-home buyers.

However, positive sentiments did not flow through to spending habits, according to ME’s report.

It found the property market’s price growth had a negative impact on Australians willingness to spend on discretionary items for a second quarter in a row, sliding to -8 per cent from -3 per cent over the past quarter.

It was the only area of personal finance that has remained in the red while other areas including sense of wealth, financial confidence, savings behaviour and debt situation remained in the black.