Investors grind first home buyers into the ground


ScreenHunter_762 Jan. 13 12.40

By Leith van Onselen

Today’s housing finance data, summarised earlier, continues to show that investors are crowding-out first home buyers (FHB).

Despite nominal mortgage rates at near multi-decade lows, FHB demand continues to languish, with the number of FHB commitments nationally falling by 1.2% (non-seasonally adjusted) in November to be down 13% over the year. They also represented just 12.3% of total owner-occupied commitments – the lowest share on record (see below charts).

ScreenHunter_759 Jan. 13 12.10

ScreenHunter_760 Jan. 13 12.10

Meanwhile investor finance continues to reach for the stars, rising by 1.5% in November, 35% over the year, and hitting the highest level on record (see next chart).

ScreenHunter_761 Jan. 13 12.12

Charting the value of investor finance against FHBs shows the divergence more clearly, with the former powering and the latter remaining in the gutter:

ScreenHunter_763 Jan. 13 12.53

Looking at the state-by-state break-down, you can see that the FHB retreat has been driven by New South Wales and Queensland, where grants on pre-existing dwellings were cancelled in October 2012, as well as Victoria, where commitments have fallen sharply following the removal of FHB subsidies from 1 July 2013 (see below charts).

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Whereas the FHB share was just 12.3% nationally in November, well below the 5-year moving average (5YMA) of 19.6%, the shares in New South Wales and Queensland were just 7.4% and 11.7% respectively, down from 5YMAs of 18.6% and 18.0%. Meanwhile, Victoria’s FHB share was only 12.2% in November, down from a 5YMA of 20.7%.

A final interesting observation is that the average loan size for FHBs has shown only minimal growth in the past four-and-a-half years. Since March 2009, the average FHB mortgage has grown by only 5.2%, whereas the average mortgage for the market as a whole grew by 14.9% (see next chart).

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As noted previously, this is undoubtedly an investor led market.

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20 Responses to “ “Investors grind first home buyers into the ground”

  1. Powermonger says:

    Looks like over the last 13 years, average loan amount has nearly tripled. My wages have not even come close to doubling, let alone tripling.

    FHBs are basically screwed until a crisis happens and investors get burnt and immigration gets cut.

    The other big enemy to FHBs are the renofesters, they are also a huge problem driving up prices for FHBs.

    • arescarti42 says:

      “FHBs are basically screwed until a crisis happens and investors get burnt and immigration gets cut.”

      Exactly. There’s no orderly market or policy solution to this slaying this beast.

    • kodiak says:

      This is the crisis.

  2. Ortega says:

    Investors are only getting started.

    Its a capital-gain, gravy-train, mass-orgy!!

    Wow…. Huh.

    I marvel as its splendour. I bow down to its obvious intellectual superiority, I cower from the power of its high priests and pious flock!!

    Borrow, borrow, borrow!!!
    Bid, bid, bid!!!

    Bang those drums…

  3. OMG says:

    I like that “Renofester”

    I live in an area of Melbourne where there are many of those. My surburb has a wealthy majority with a not so wealthy minority that live in former goverment housing. These ex commission houses are now prized lots due to their size and knock-down-ability and are being razed at an alarming rate. This is one quarter of my suburb.

    The other three quarters of my suburb sees every third house either being knocked down for a new build by Chinese investors or renovated (rendered and picket fenced) by locals.

    Median house price rose 250% from 2000 – 2010 and keeps rising.

    All in all, money makes money and this will continue.

  4. SoulNigga Chips says:

    It was covered here previously by MB and I don’t think it should be overlooked that the only way to track FHB is via loan applications, where a checkbox is ticked if the FHB is able to claim FHOG or stamp duty savings. If the checkbox isn’t ticked, then the loan application will not be classified FHB.

    Anecdotally, I know of three friends and myself that have all recently bought their first homes in inner city Melbourne and have not been eligible for FHOG etc, so we have not been classed as FHB on our loan applications.

    I’m sure there has been a reduction in FHB, but I think it’s being misrepresented in the stats because of the above.

    • Maybe, but the inexorable rise in investors cannot also have been misrepresented and has to have been at the expense of somebody (e.g. FHBs).

      • Peter Fraser says:

        Yep, that certainly can’t be denied, there are a lot of investors buying, although SNC above does raise a good point.

        Another point is that a lot of GenY are buying an IP and remaining at home with mum and dad. They are both FTB’s and IP buyers, but recorded as Investors, which is what they are.

        The ground rules changed, so the players changed their play book. I know that I would in their position.

        Damned if I know how to drill down into that data though. The only narrative I have to support it is that investors can’t accumulate a never ending portfolio of homes. Sooner or later they run out of equity or LMI approval if they are using higher LVR products.

        Investor alone can’t support the market forever, there are limits when they are accumulating at this rate.

        A slower pace would be achievable, but this isn’t a slow pace and it has been maintained for some time.

        Why are FTB’s much higher in WA when the FHOG is only $3000 for an existing home. Does $3000 really make that much difference. Compare the FTB numbers for WA and NSW – how do we explain the chasm between them?

      • velocity says:

        Going by my experiences as a 30ish WA male – a combination of mining boom leading to rapid accumulation of house deposits and the usual fear of missing out. Whilst the FHOG has recently been changed, the lack of stamp duty for purchases under $500k still remains.

        Most people I know fall into those two camps. Many are enjoying the crazy WA wage blowout, that never really changed during the GFC and thus were soon quickly able to obtain a mortgage.

        Others have bought on fear of missing out or the ‘maturity’ of the decision to buy your own home. After all, the usual peer pressure is in the second question people ask after “what do you do?” – “where do you live?”. Most of these whinge about expenses and lack of money.

        Both see rent as dead money and home ownership as investing.

      • Peter Fraser says:

        Yes stamp duty costs will play their part, but the costs in Victoria are almost as high as NSW and Vic has almost 12% FHB’s compared to 2.8% in NSW according to AFG Devember 2013 stats.

      • Neville Gearless says:

        “Why are FTB’s much higher in WA when the FHOG is only $3000 for an existing home. Does $3000 really make that much difference. Compare the FTB numbers for WA and NSW – how do we explain the chasm between them?”

        That would be because of supply, WA releases a lot of land, there are large tracts of new developments all around Perth’s periphery. Postage stamp sized lots though. Sydney, I get the impression they keep their market choked.

        Also Perth has much higher pop growth, 3+% last year, nuts.

  5. netti says:

    In an ideal world of Labor & Libs, FHBs would drop to zero.
    That means all housing, with exception of PR of an investor, would become rental.
    One of the principles of the FIRE economy is to financialise shelter.
    If a govt, be that Labor or Libs, can get the tax system right, then the FIRE sector gets its wish.
    For investors, it’s a gift horse, punt on it before they change the rules.
    Investors get to walk all over potential FHBs, or at least FHBs not depo$it-backed by their parents.
    And when all else fails and prices are slowing, open it up to foreign buyers. Millions in the wings.
    The message from on high seems to be: ‘Aus does not really need FHBs anymore’.

  6. squirell says:

    i thought there are so few FHBs because they are waiting to pick up the slack when prices stop going up 15% a year. Its not about affordability, its about a coordinated effort between all parties to ensure we keep this magnificent housing beast going. Think of the pent up demand!!! get in now and get rich!!!

  7. fwoark says:

    Que calls for fhb grants in 5, 4, 3, 2 …

  8. aj. says:

    FHB’s need to go hard, go long, trust the government has your back. They won’t let you fail.