Options for first-home buyers narrow as listings below $700,000 drop: data

Prospects for first-home buyers have worsened during the COVID-19 pandemic as new figures show the proportion of homes on the market at an affordable price point has dropped. 

In Sydney, only 30 per cent of listings fell under the $700,000 threshold during May, according to Domain data. That is a 6 percentage point drop in listings compared to May last year.

The situation was better in Melbourne where 61 per cent of properties fell below $700,000, one percentage point less than a year ago.

The slim pickings come as many first-home hopefuls are also facing job losses or cuts to their hours amid the coronavirus-sparked recession.

Domain economist Trent Wiltshire said the property market had not improved for first-home buyers.

“The proportion of listings available to first-home buyers has dropped away a little bit,” Mr Wiltshire said. “For first-home buyers in Sydney, there are fewer options at that more affordable price point. Less than one in three properties in Sydney [fall under $700,000].”

But Mr Wiltshire said first-home buyers have also been hit in other ways that make it difficult to get their foot in the door.

“We know that the COVID-19 recession has hit younger households particularly hard,” Mr Wiltshire said. “Younger people are more likely to work in hospitality or retail or the recreation, art sectors. We saw in April or May about a quarter of these jobs were lost in these industries.”

While official figures this week showed the number of new home loan commitments fell more moderately, it did not capture the entire picture, Mr Wiltshire said. 

“The number of new home loan commitments in NSW fell 1.1 per cent in April. But in Victoria it jumped 6.9 per cent in April,” he said.

“In Sydney and Melbourne, the first-home buyer numbers held up a lot better than overall finance approvals but this only partially captures the COVID effect. [These home loans] might have been negotiated in March and finalised in April. We’re probably going to see bigger falls in May.”

The bigger hurdles, Mr Wiltshire said, were first-home buyers’ job security and incomes.

“A lot of people are out of work or working fewer hours, making it very hard or impossible to buy a home.”

New listings under $700,000

Source: Domain

Ray White NSW chief auctioneer Alex Pattaro said fierce competition for the limited sub-$700,000 properties on the market was holding prices steady, if not raising them.

“Listings are down across the board but first-home buyers in particular will feel like it’s harder to buy because there is so much competition in the market,” Mr Pattaro said. “And prices have subsequently held firm during COVID-19 compared to some properties in some areas.

“All of the one to two-bedroom units I have sold under $750,000, the average registered bidders has been north of five.”

Mr Pattaro said the same was true of Victoria.

NSW and Victorian regions where the share of listings under $700,000 dropped most

Source: Domain

In Sydney, far-flung and traditionally more affordable areas saw the largest drops in sub-$700,000 listings.

For the Blue Mountains, the proportion of cheaper homes dropped 17 percentage points from May last year, to just 52 per cent of stock on the market.

It was followed by the Macarthur and Camden region with an 11 percentage point fall in affordable stock from a year ago, to 55 per cent of the market.

The St George region had a comparable drop, leaving just 25 per cent of homes in the first-home buyer price range.

The only area that saw a rise in first-home buyer listings was the Sutherland region which increased by 6 percentage points. But the improvement meant just 27 per cent of listings fell under the threshold.

Meanwhile the first-home buyer market in Melbourne fared slightly better with two outer areas seeing a small increase in sub-$700,000 listings.

The west recorded a 5 percentage point increase with 86 per cent of listings falling under the threshold.

The north-west edged up a percentage point with 81 per cent of listings under $700,000 in May.

But there were many regions that slid backwards with leafy Stonnington recording a 10 percentage point decline in sub-$700,000 properties, the biggest drop in the city for first-home buyer listings.

The Mornington Peninsula fell 5 percentage points leaving just 39 per cent of the listings in the area under $700,000.

AMP Capital chief economist Dr Shane Oliver said the pandemic had dashed first-home buyers’ hopes to get onto the property ladder.

“It’s sad in a way … we’ve seen the demise of the investor based on the finance housing figures, but the problem they’re facing is that there are not a lot of listings,” Dr Oliver said.

The turnover of the sub-$700,000 sector of the market has not occurred as the owners had been adversely impacted by the COVID-19 crisis themselves, Dr Oliver said.

“Normally that group of first-home buyers that got into the market a few years ago might be looking to trade up by now but given the job losses they’ve decided to put,” he said.

“At the same time things aren’t bad enough to cause forced sales either, because the bank payment holiday has basically put forced sales on holds.

“It’s all led to a situation where there is not a lot of stock around for first-home buyers even though it’s a reasonably good time to get into the market – they’re not competing with as much investors as in the past, interest rates low and banks are keen to lend.

“It presents a bit of a dilemma for first-home buyers.”