Australian first home buyer numbers plunge by 8 per cent in January

Young people in Australia are being left out of the housing market, even as rising interest rates are driving house prices down.

The number of first-time homebuyers fell 8.1 percent in January to the lowest level since February 2017, according to new data from the Australian Bureau of Statistics.

That was the month before the Australian Prudential Regulation Authority announced a crackdown on interest-only loans and investor lending, leading to a downturn in the property market.

The share of first-time homebuyers living in the property they buy peaked in January 2021, two months after the Reserve Bank of Australia cut interest rates to a record low of 0.1 per cent.

Since then, they have fallen in most months, even before the RBA raised rates in May 2022 for the first time since November 2010.

The January data covered the Reserve Bank’s first eight consecutive monthly rate hikes, with the board not meeting during that summer month.

The RBA raised rates again in February to a 10-year high of 3.35 per cent and Australia’s four major banks all expect another 0.25 percentage point rise next Tuesday, which would push interest rates to 3.6 per cent. to take.

Westpac, ANZ and NAB expect the Reserve Bank to raise rates three more times, in March, April and May, to an 11-year high of 4.1 percent.

As interest rates push home prices down, strict rules from the banking regulator APRA mean banks must assess whether a borrower is able to cope with a three percentage point increase in variable mortgage rates.

The share of first-time homebuyers living in the property they buy peaked in January 2021, two months after the Reserve Bank of Australia cut interest rates to a record low of 0.1 per cent

That means a borrower earning an average full-time salary of $94,000 can borrow just $436,000, Canstar calculated.

This person with a 20 percent down payment can only buy a $545,000 house or unit.

That level was below Melbourne’s median apartment price of $585,366 in February, CoreLogic data showed.

It was also well below Sydney’s average unit price of $769,733, even after a 10 percent annual decline.

This means that a first-time home buyer with an average salary should buy something with one bedroom or far from the city center.

Those wanting a mid-market home are barred from Perth, where $587,274 is the average price, and Darwin, where the equivalent midpoint is $585,836.

But they have options in flood-stricken Lismore, on NSW’s north coast, where the average house price is $403,430 after an annual decline of 24.8 percent.

First home buyer activity also declined in 2021 as the Reserve Bank terminated its $188 billion Term Funding Facility, where it lent money to the banks to provide low-cost housing loans.

The ABS’ head of finance and wealth statistics, Mish Tan, said tapering off pandemic stimulus had led more to an initial decline in first-home buyer activity than rising interest rates.

“The decline coincided with the tapering of stimulus measures for the COVID-19 pandemic,” she said.

But rate hikes in 2022 continued to shut out new entrants to the real estate market.

“Anecdotal feedback from lenders suggested that reduced borrowing capacity due to rising interest rates has further dampened overall demand for new home loans in recent months,” Ms Tan said.