AFG: Refinancing leads as FHB locked out

house of cards

by Chris Becker

Some sobering figures from AFG this morning with the bet on lower interest rates in the medium term definitely the one to back by most home owners, but not first home buyers. Refinancing “surged” to just over 37% of all new mortgages in December, the highest in over two years.

More from the release:

AFG Mortgage Index shows that refinancing rose over the last quarter of 2014 from 33.5% of all home loans processed in September, to 37.3% in December. Also in December, the proportion of borrowers choosing fixed rate loans fell significantly to 14.5% of all home loans processed from 17.1% in November.

Average mortgage size sits at $444K nationwide, with NSW at $544K:

mortgagesize

The re-fi change is interesting as the GM, Mark Hewitt points out the previous change in sentiment was at the peak of variable rates in March 2012, where borrowers tried to lock in lower rates at the top of the cycle. Maybe this is a sign of a bottom in the current cycle?

Also, you gotta feel for the first home buyers, now down to below 7% of all home loans processed nationally with almost none in NSW:

First home buying accounted for only 1.7% of all new home loans in NSW, 3.9% in Queensland, 5.3% in South Australia, 6.9% in Victoria and 18.9% in Western Australia.

The long term national average for first home buyers was previously around 15%.

mortgagessold

This is not the sign of a healthy market or households filled with confidence of the year (s) ahead. The country is stuck, because raising rates would crowd out the FHB completely, while lowering rates just embiggens the huge speculative crowd that really drives the riskiest risk-free asset in the world – Strayan property.

Hurry along, they ain’t making more of it!

Comments

  1. if it’s only %7 fhb then rase rates, considering the country has pretty much failed to look after fhb anyhow. Break the cycle

    • I still hold to my thought that all of this FHBer stuff is deliberate!
      Someone has to be there to be the buyer of last resorts when things go pear shaped. And if the FHBer had been allowed in here, and the recent past, who would that be? No one…..
      The FHBers are being ‘held back’ for when they are needed, and that will be as a ‘savior point’ for current, about to become distressed, property holders, and a better entry point for FHBers….

      (All this wisdom form someone who just took a trip out to the woodshed to see how that LongA$/Short NZ$ possy is doing! A peak inside revealed a whimpering sod crying “No more!” and my cheery response of “You’ll be right. Hang in there…”

      • I thought the buyer of last resort was Blackrock or the Oz equivalent? You know, after prices drop 20% and the FHBs can’t get a loan because they’re considered too great a risk with the economy having turned to sh$t!

    • I just refuse to believe the accuracy of the FHB category statistic. It seems to be redundant or has been completely skewed in part because of FHB’s purchasing as investors or through thier superannuation accounts.

      Get the impression that a proportion of well off boomers are helping thier kids with an IP deposit and/or loan guarantor so they can secure a tax effective option immediately and front run the Chinese investor frenzy that has been whipped up in the media.

      • really? FHB’s buying through SMSF? So you are saying someone on say, $80k for the past 10 years (which sounds pretty high for the average FHB cohort) makes around $8k a year into comp super. So they save $80k for a deposit (lets exclude legals/stamp/LMI fees etc). What investment property are they going to buy with that? You would need to assume they invest 100% of their super into 1 property and the bank is willing to lend at very high LVR’s on a non-recourse basis.

        Just doesn’t stack up.

        FHB’s are out there trying to save like hell, living with mum and dad or else splurging their $ on retail. Go to Hong Kong, Singapore etc see why they are so consumption driven – their FHB’s have given up. I suspect a lot of Australia’s have too and are letting the speculators eat themselves.

      • Yes good point Jim. Solo SMSF FBH is probably out of range for most. Know of siblings that have pooled their super savings together and tipped in extra contribution to buy an investment property.

      • I know of 4 people who have done this in perth , not SMSF but loan guarantees from parents. 2 from one family. Each has an investment property. All live with folks and rent out the property.

        Unless you have a mate willing to do the compliance for the SMSF at cheap mates rates, they dont seem to be worth it for one property only.

        I do know of two brothers at a workplace that each purchased an IP and “rent” to each other for the tax benefits. They each live in the others property. They have been doing this for 6 years and not been pinged by the ATO yet.

      • @AngryMan, Yeah the mining boom in Perth has much to answer for. Seems to have developed its own culture where the most flagrant abuses and vulnerabilities of the tax system are openly bragged about.

    • Happy New Year all

      “The country is stuck, because raising rates would crowd out the FHB completely”

      Yeah… because raising rates to normality would double the rate of growing a deposit, whilst prices are put under nominal pressure (debt expense), and another asset clad (cash) becomes more attractive? Raise rates. FFS raise rates.

      • +1 Andy.

        “The country is stuck, because raising rates would crowd out the FHB completely”

        Only if prices stay high right?

  2. GunnamattaMEMBER

    Average mortgage size sits at $444K nationwide

    Without having any firm idea/specific knowledge I would guess

    ….that would involve repayments of circa 4500 per month.
    ….two punters on an average salary (circa 75K) would be swinging circa 8-9K into a household per month – though I reckon there would be plenty on less.
    ….that average mortgage may be chewing up more than half an ordinary housold income

    Throw kids car and victuals into the mix, and maybe an annual holiday and there is a lot of the story behind retail/consumer sentiment right there

    • The repayments would be about $2400 per month at say 5.05%.

      The Kouk today predicted two year rates to fall to 4% which would put the repayments at $2120 per month.

      You may need to rework your calculations.

      • GunnamattaMEMBER

        I’ve just gone to a mortgage calculator site and see you are quite right….

        Which I suppose eases things considerably if one assumes that 25 years worth of uber low rates is a lay down misere.

        Here was I raised in a debt repayment mindset of another era

      • Well it was a guestimate. You must be a child of the seventies and eighties because rates would have to increase to 11.5% to drive repayments up to $4500 per month.

        How about we settle on 7% with repayments of $2954 per month, which is $682 per week.

        How would Mr and Mrs Ordinary Household fare then?

      • Yes but 5.05% is not the long term average. Suckers buying now work out their repayments between 5 – 6%. This false belief that the mortgage is do-able and everything is honkey dorey.

      • We owe around 435 (on a 510k valuation circa March ’11). 60% of our loan is fixed around 4.9 and the rest os variable around 5.11.

        Your numbers are about right.

        We actually pay more than our minimum as our rates came off by about 25bps but we maintained repayments (my dad was a bank manager in the State Bank Vic and instilled debt repayment into me).

        It’s funny how people think new loans are suckers.

        When we struck ours, we were very conservative, only looking to borrow half what we were able to (circa 1M) with a 15% deposit and factoring in rates at 10%.

        From talking to others, we’re not alone.

        Maybe people taking new loans aren’t suckers,but know what they’re doing.

        Pretty presumptuous to think the people here know everything and anyone acting opposite to your beliefs is a sucker.

        T

      • migtronixMEMBER

        Pretty presumptuous to think the people here know everything and anyone acting opposite to your beliefs is a sucker.

        Just……wow! What are you always saying about “deniers”?

      • flyingfoxMEMBER

        @tmarsh

        Not many in your position however. Many stretch themselves for status or otherwise…

      • @ FF – not really. All loans must meet serviceability criteria which ranges from close to 7% to up to 8% for mainstream lenders.

        A lot of people can’t get loans.

      • flyingfoxMEMBER

        @PF

        It’s a matter of opinion, Peter. Many professional couples are getting into circa 1M loans when they are not guaranteed of two high incomes over 30 years.

      • @ FF –

        Opinion? Lets stick to facts.

        Young FTB couples are taking loans of around $320,000 with monthly repayments of $1727 or $398 calculated weekly.

        They don’t seem to be doing it tough. What the $1M borrowers do is their concern, at that point in their life they will have a lot of equity.

      • flyingfoxMEMBER

        @PF

        The FACT is that 320K in sydney and melbourne barely get you a 1 bed apartment. Two of my colleagues who have bought in the past 24 months have mortgages over 500K with deposit help from parents. Both bought houses in middle suburbs over 750K. These are FTBs …

        I know of few others in similar positions from from friends …

      • @PF,

        Genuinely curious – where in Australia – apart from Mooranbah and surrounds – can you buy anything for $320k ?

        It can’t be in Sydney, Melbourne or Brisbane – where half of the inhabitants of this great nation reside.

        Having tried last year, that doesn’t get you the most basic possible starter home in Truganina or equivalent in Melbourne.

      • @ StatSailor
        A mortgage of $320,000 is probably a 90% loan so buying price is likely to be $350,000 to $360,000.

        It’s very possible to buy starter homes on Brisbane’s outskirts for that price.
        http://www.realestate.com.au/buy/between-0-400000-in-springfield,+qld+4300/list-1?activeSort=price-asc&includeSurrounding=true

        I didn’t bother with the northern outskirts or southern outskirts where there will be more again.

        I take your point about Sydney but that is Australia’s most expensive city. Is there any advanced wealthy western country where all citizens can afford to buy in their most expensive locality?

      • flyingfoxMEMBER

        @PF

        However, the FHB looking at those localities you speak of will not be earning over 150K combined …

        Also between Melbourne and Sydney, we are talking over a third of the market. Perth is not far behind.

      • Brisbane okay, but I’m saying that even in the growth corridors in Melbourne $350k isn’t enough.

        (mind you, partly because the developers don’t build homes as modest as those that went up in the ”60s and 70s anymore. If you want a small house, you have to buy it in an established suburb for two to three times the price)

      • PF
        Springfield is an outskirt of Ipswich, soon to be joined by the massive Ripley Valley development. Those properties are priced accordingly.

      • @ FF –
        I was reply to a question that stated house for that price were not available in cities which included Brisbane.

        Spleen, technically you are right, Springfield and Springfield lakes is just over the council border and in Ipswich, but the train link is to Brisbane and people there think of themselves as being in Brisbane. I guess the same could be said for residents of Morayfield in the north and Logan in the south.

        So to comply fully with your request here are some homes at Durack which is certainly within Brisbane and about 25 minutes by car to the CBD.

        http://www.realestate.com.au/buy/with-3-bedrooms-between-0-400000-in-durack%2c+qld+4077/list-1?maxBeds=any&source=refinements

      • the very idea that couples earning almost two times median income are supposed to be buying the cheapest homes in the cheapest suburbs is enough to say that Australia is in the midst of an epic housing bubble.

        Where are couples earning median income ($80k pa) supposed to buy? How about couples earning half the median income ($40k pa)

      • I guess those Murderville suburbs will come good eventually. I remember when Stafford was considered a rough suburb.

      • Spleen – murderville? Serioulsy – I used to work at Inala Civic Centre in the bad old days and I never saw anything that wasn’t happening in the so called best suburbs.

        I’ve never heard Stafford called as a rough suburb – where do you get these ideas from?

        You asked for an example and I gave it to you, now you go the full Princess about the suburb.

      • Carn now Pete, don’t go all earnestly indignant on me, old mate. You’re erudite enough to recognise some low grade irony when it passes you by. We all know your average prospective first time buyer in Brisbane looking to live anywhere other than a 30 minutes terror filled train ride from Shitsville is facing a far larger mortgage than $320k. You know, those upstanding middle class aspirants who make the police patrols and welfare cheques possible in the low mortgage outskirts.

      • Spot on doctorX and Spleenblatt

        Two professionals at the start of their careers lucky enough to afford Durack !

        These are welfare/crime riddled suburbs (Acacia Ridge, Inala, Waterford, Richlands) and what do you actually get for this financial risk? I would surmise the potential for negative equity and sending your kids to school in a crimezone. Awesome!

        Durack would be 20 minutes to the CBD at 3am in a 500hp car.

        Kangaroo Point can take 20 minutes from Eagle Street with a spot of rain at peak hour.

        More relevant – public transport is more like an hour each way.

        So you get the benefits of living in a crimezone and a one hour each way commute.

        And while we are discussing Stafford – I cannot believe anyone in their right minds is borrowing half a million dollars to live in a suburb with wooden homes with 50 year old kitchens and one bathroom.

        Stafford was chockers with housing commission homes too. A mate had the misfortune of living next to a meth fueled scumbag in one.

        Burnouts at 3am followed by domestic violence – the Australian dream – just work harder and borrow more

        There is a reason the Australian ponzi is running out of new players – people value their lifestyle

      • Spleen, the children of the middleclass in Brisbane are buying their first home in Suburbs like Moorooka 20 minutes from the city for about $420,000 to $450,000 with some assistance from mum and dad, so the mortgage is a little larger at $380,000.

        Townhouses are popular.

        http://www.realestate.com.au/buy/with-3-bedrooms-in-moorooka%2c+qld+4105/list-1?maxBeds=any&includeSurrounding=true&persistIncludeSurrounding=true&activeSort=price-asc&source=refinements

        Or they buy further out in suburbs like Springfield, as I mentioned earlier.

        You don’t know Brisbane well do you?

      • flyingfoxMEMBER

        @PF

        There is a reason why suburbs like Moorooka are cheaper than surrounding suburbs and even those further away.

      • Moorooka isn’t cheaper than surrounding suburbs, it’s dearer than Rocklea and Salisbury.

      • Durack !

        20 minutes to the CBD – with a police escort at 3am – otherwise a 1 hour public transport commute. The upside is you could score some meth at the Station.

        Unless you can afford to pay $30 a day for the early bird parking in the city…

        Lucky you though – on the ‘property ladder’ – just hope you don’t have negative equity once you want to send a kid to a local school outside of a crimezone.

        Stafford had plenty of housing commission places. Mate lived next to a meth fueled one offering burnouts and/or domestic violence at 3am a couple of nights a week.

        Half a million to live in a wooden home with one bathroom and a 40 year old kitchen – Australian Dream!

        The Ponzi is running out of new players as people start to account for standard of living.

      • Hi All, long time lurker here. Thought I’d share our recent home-buying experience in Sydney for anyone interested. We sold our first home (in southern Sydney) early last year (a large development was planned for the other side of our previously quiet street, so unfortunately it was time to move on). We witnessed the rapid escalation in prices, felt like every fortnight the prices jumped. We thought we were in a reasonably good position to buy as we had money in the bank, and were looking in the traditionally ‘cheaper’ side of the Shire (where our first home had been). It quickly became obvious that unless we were prepared to borrow significantly more, we would be lucky to secure even an ‘entry level’ detached dwelling, as these were increasingly going into the high 700Ks. When I asked how people were affording it, agents suggested people were borrowing to the max. We noted the number of young couples and young families attending with their parents. We chatted to a few, and it was obvious we were also competing with the Bank of Mum and Dad. At one place I spoke with an older couple who were checking the house for their kids and they were appalled their kids needed to accommodate a growing family but couldn’t afford it. Basically, different demographic groups all competing for the same lower end properties. People who traditionally would buy closer into the Shire, or even in the St George area, were buying in the outer Shire areas we were looking at, pushing the people who would traditionally have bought there- ie us – further out, a real domino effect. Eventually we gave up and decided to buy a cheaper, smaller place 15 minutes further south, where the mortgage will be much smaller and (hopefully) provide more options down the track, either to sell, keep as PPOR or rent out. Even though we’re now 53km from the CBD where I work, at the very least, we’ll have no financial stress, I don’t know how people sleep at night with the debt levels they must be taking on.

      • flyingfoxMEMBER

        @PF

        I lived in Yeronga & Fairfield for over 5 years Peter. Rocklea is 5 houses in the middle of an industrial zone that is in the middle of flood plains.

        That it is more expensive than Salisbury isn’t saying much. Given that those figures are heavily skewed by the few very expensive places near yeerongpilly and tarragindi doesn’t help either.

        In any case, you now just carrying on about something that to a significant proportion of the population does not matter. Given that Sydney and Melbourne are significantly more expensive than Brisbane, as is Perth, how are the majority of FHB doing?

      • @ FF
        Statsailor said “Genuinely curious – where in Australia – apart from Mooranbah and surrounds – can you buy anything for $320k ?

        It can’t be in Sydney, Melbourne or Brisbane – where half of the inhabitants of this great nation reside.”

        I have conclusively proven that to be wrong for Brisbane and yet you and others remain in serious denial.

        Nothing more to be said.

    • Seems like an area where use of “average”, rather than median, as a measure of central tendancy is pretty dubious.

      Also, it seems, especially in the light of FHB levels, that precious few people with an ‘ordinary’ household income has a mortgage.

      (though I note that ‘ordinary’ household income is probably more like 2 x 55k – the average of all earners, as opposed to 2 x 75k – the average of all full-time earners)

      All of which leads to a question – what is the profile of a typical FHB these days?

      • GunnamattaMEMBER

        All of which leads to a question – what is the profile of a typical FHB these days?

        …..a 22 nephew or niece of someone connected with a SOE?

      • ‘All of which leads to a question – what is the profile of a typical FHB these days?’

        One that doesn’t exist, or at best is concocted in the mind of a shonk.

        ‘The Melbourne man at the centre of an alleged $110 million mortgage fraud holds a senior position in one of the country’s largest mortgage brokerage networks, raising concerns that the true scale of the potential financial losses is yet to be known.

        According to documents with the corporate regulator, Mr Hassan has held his credit license via a number of different lenders since 2011, including RAMS, Premium Finance Services and, currently, Australian Finance Group.’

        Read more: http://www.smh.com.au/business/massive-fraud-link-to-major-mortgage-broker-20150106-12iyui.html#ixzz3O66Gmbq3

        No wonder their market share is flying!

      • I agree, the use of ‘averages’ is super dangerous and fallacious… I do recall the US sub-prime ABS obtained their ratings because the agencies basicaly looked at ‘averages’.. never mind the fat tails of highly leveraged borrowers trying to get into the market or upsize to impress their friends.. this is what has killed other markets and will kill Australia

        To use the same calculations, looking at the ATO website, the monthly take home pay for two people on $75k each is $6,471. So at todays record low rates, an average mortgage takes 40% of the average take home pay. Raise rates by just 1% and this goes to 45% of take home pay. A 2% rise is 50% and a 5% rise to the not-un-hear-of rate of 9.79% and you are looking at giving nearly 70% of dual take home incomes to service the average mortgage.

        Doesn’t take a genius to see this isn’t sustainable and is due for an unwind:
        – there is zero room for job loss. One of these borrowers loses their income, and mortgage gets to 80% of take home. Think about that in an environment where unemployment is rising, real wages are falling, the economic outlook for many industries / sectors is poor (think anything to do with mining, manufacturing even services as we saw today). Even think about that great deal the Aus govt did with the Chinese where they can bring their own workers and push down wages.

        – zero room for rate rises. Australia is so stupid in thinking that interest rates can only go down. You take out a 25 year mortgage where rates have averaged 8.44% between 1990 and 2012, spiking to 17% and you think things can only get cheaper?

        – zero room for cost of living.

        Lets face it – housing has eaten everything in this country. No money to spend on retail because huge mortgages, hence retail and local manufacturing that supplies it is shot. Requirements for ever rising wages to keep up with mortgages means we have made ourselves uber uncompetitive. Huge household debt levels mean the govt loses is AAA if public debt gets to 30%. The list goes on and on.

        What a stupid, stupid country.

      • @Jim well said Jim, amazing what three words can convey…..stupid, stupid country.

        We just need to get to ingenious, progressive country.

      • Great point Jim, no room for rate rises and no room for cuts (supposedly). Exactly why we needed macro prudential.

      • Sweeps, MP will never happen and if it does, the horse has well and truly bolted anyway and will be a meaningless act.

    • $444k is not an average mortgage size, it’s the average of all mortgages. That is a huge difference.

      $444k is closer to the minimum mortgage for everyone who bought in last 5 years except upgraders (first home buyers and investors).

      In Sydney (and Melbourne) numbers are significantly higher because $500k buys you nothing,

      • Indeed the figure represents the average of all new loans written.

        Given more than a third are refis – written on partially paid off mortgages taken out at any time in the past – to say nothing of upgraders, this figure tells us almost nothing about the typical loan size of someone who bought in recently.

      • more than half of all buyers in Sydney and Malbourne are investors or FHB with very small deposits. With median prices well over $700k many of them have mortgages well over half a million.

        Even with current low rates loss of job or tenants may cause big pain.

        If unemployment continue to rise it will be painful not only for FHBs but investors as well.


      • f unemployment continue to rise it will be painful not only for FHBs but investors as well.

        +1

        Seems to be often overlooked that a lot of young renters will disappear back to mum and dad at the first sign of financial hardship.

      • renters also tend to squeeze (share) into smaller places – e.g. 4 people who used to rent alone suddenly share 3 bdr house leaving 2 or 3 studios or 1-bdr units empty

        people who rent larger homes also tend to downsize

        at the end rental vacancy increases and because many of rental properties are negatively geared it creates huge downward pressure onto rents (most of PI cannot afford to have properties vacant – not even for a few months)

      • That too.

        I was probably thinking more of the way a lot of people tend to assume that rental demand is extremely inelastic, which is clearly not the case – it’s not even all that sticky.


        (most of PI cannot afford to have properties vacant – not even for a few months)

        Judging by for lease signs in my inner Melbourne western suburb there are at least a few feeling that pain right now.

  3. One strategy that I know is employed is where a couple (or single) buy as an investor, move in with the folks (or in-laws) for a year and then move in after 12 months.

    This allows you to include the rent in your mortgage application and afford a bigger house! Win!

    Additionally, when we bought recently (not FHB, trade up) all the mortgage broker wanted to sell was interest only, investor loans, despite the fact we had no intention of holding property as an investment.

    I suspect the FHB and investor numbers are skewed but the numbers are scary nonetheless.

    • They don’t even need to move in with their folks. If they decide to move into their investment property and still be able to meet the repayments, there is nothing anyone could do about it.

  4. It is very exciting watching the RBA explore the outer limits of monetary policy but it is a policy of desperation and last resort.

    With Mr Hockey determined to apply a blow torch to demand by starting his austerity program at the bottom of the economic pyramid, driving the wealth effect with the debt machine is the only alternative.

    Using foreign buyers and the risk slurping investor crowd to prop up inflated asset prices is bottom of the barrel stuff.

    The only thing preventing a meltdown is the all in gouging by state, local and federal governments on new land releases. Their unbridled greed and drip fed methodology is keeping the price of new land solid as a rock.

    When rising unemployment kills off the high population ponzi intake the fun will really begin

    • migtronixMEMBER

      Buddy!!! Happy new year Pfh!

      I hope that as the atomic clock decayed and irradiated it’s last wavelet for the calendar proud and prescient Gregory bestowed on the western minded time keepers, an eighties style “pash” was close at hand, and rewarded your patient and measured deliberation with the abandon of a lustful teenager.

      Where the hell did that pour down come from?

      • Jolly celestial tidings to you as well,

        I am out of service area at the moment with the Dire Wolf but I wrapped a flock of cockatoos in alfoil and every now and again they swoop into alignment and deflect a few particles of the internet superhighway towards the bent coathanger that is sellotaped to the back of my idevice.


    • When rising unemployment kills off the high population ponzi intake the fun will really begin

      Six quarters straight of falling NOM due to increased departures – I’d say if the ponzi hasn’t been killed it’s taken some solid blows to the head.

      • Yep – even a govt as dim as this one knows that an open gate policy with rising unemployment is a recipe for electoral oblivion.

        The problem they have is that too many wallets are already full of dust and moths due to massive household debt sea anchors.

        So when the ponzi related demand mojo fades it will combine with debt burden / deleveraging to really kill off domestic demand.

        And the government has no idea it is even happening and just keeps on pushing the RBA to keep the monetary policy / debt machine show on the road.

      • The ABS has noted the unusual uptick in departures.

        That side of the equation is out of the government’s control, unless they have secret plan to provide full employment they are for some reason not sharing with us.

    • Rent Seeking Missile

      “It is very exciting watching the RBA explore the outer limits of monetary policy but it is a policy of desperation and last resort.”

      They’re just warming up.

      I reckon Glenn has had a novelty-size red button emblazoned with the word ‘PRINT’ installed in the governor’s office.

      Fun times ahead.

  5. Hi,

    As a potential first home buyer, I can confirm that yes I will not buy at current prices vs location. I work 8-6pm in the city, could get a loan for 800k easily; but would not be able to pay it through a recession. if I had confidence in capital gain upside i would be more easily swayed but I don’t. So saving difference rent and loan repayment for desired location for now.

  6. I am CPA in Public Practice is WA and readily admit that most of you get this stuff much more than me. My question is why the % of FHB is so much higher in WA when mortgage level, and to a degree, property valuations are higher than most of the country. Have we, as a state, lost our way that much? Furthermore, when we the flow through of the fall in IO price really start to bite, is it going to fall further and will FMG survive?

    • Its due to the relatively high salaries younger people can get in WA through fifo and the like. Most of my friends in their 20s have all bought houses.

      • Also the average FIFO employee thinks because they are in mining they have access to high salaries for life. They are ignorant of the fact that commodities prices have peaked and mining is now an industry in decline.

        Lets see how many FHB’s there’ll be once the redundancies really start to flow

      • Possibly, however my friends are typically working operations and not the projects and so have “safer” jobs, have bought in cheaper suburbs, and have put down reasonable deposits.

        My general impression is the west coast is a much better place to be for young people particularly if they are not overly skilled.

      • Two of our staff are in their 20’s and have just entered the FHB market. Their decisions weren’t driven by FIFO type salaries as neither them or their partners are on anything like that level. I am quite concerned about the level of income that can get a FHB into the WA market and the implications that will have for the broader economy if the “bust” is as big as some on here are predicting. I am also questioning the reliability of the figures. 18-19% FHB’s in WA compared to 2-7% in the rest of Australia suggests something more than high FIFO wages is the driver as most FIFO’s I know (and I do the tax of a heap of them) have had their first home for a while and wouldn’t be in the 18%. The ones that are would make up a very small part of the WA population.

      • “I am also questioning the reliability of the figures. 18-19% FHB’s in WA compared to 2-7% in the rest of Australia”

        I’m thinking its a lot of pent up demand, from people shocked by rental rates in Perth being so high until recently. Combine that with released labour from the mining downturn into a housing construction boom here, so im not overly surprised at a large number of FHB as people transition from renting to owning.

        It would also explain the sudden drop in rental rates (which some landlords still dont seem to have accepted), beyond what the small increase in apartment construction would have allowed for.

    • Australians just accept that they pay more for things in general and West Australians just accept they pay more than other Australians. The psyche is well and truly entrenched. In WA we have a premier who spends billions on rich waterfront developments and football stadiums for private sporting franchises. The he hikes motor car registrations to pay for the budget black hole. Do you hear a word of outrage from sand gropers ?
      Are there protests in the street.
      No. We just accept it.

      • The rich praise Collin’s behavior and the middle class believe they are rich. If we have a major fallout from mining I think the general perception of the public will change and we will begin to see protest and people calling for action and change to the WA budget.

    • Yeah I probably wouldn’t recommend purchasing a house at the moment in WA, but then again I don’t know what will happen.
      I don’t necessarily think the WA economy will necessarily implode due to a commodity downturn like others on this forum would have us believe. I see the issue where there is a lot of employment tied up in resource projects which is/will be released, government cuts, and some unprofitable operations cease production leading to a rise in unemployment and downward pressure on real wage growth.
      The resources industry does have “some” diversification outside FeOre. Existing nickel and alumina producers for instance have benefited from both exchange rate and commodity price improvements in the last year and even the Australian gold price has at least stabilised. Throw in the general cost cutting across the industry, the natural exchange rate hedge, and lower oil prices and it doesn’t seem all that bad.
      For the record I work in the resources industry but don’t own WA or Australian real estate. I’m just an interested observer.

      • @ Kristian

        Thanks for the thoughts and I have heard similar suggested through my contacts in the resource industry. I guess we are all “interested observers”. I obviously have WA real estate and a business that has some exposure to the resource industry (we have much more exposure to the domestic construction industry and that is our real concern) and have clients and friends continually asking if things are going to as bad as what some are saying.

  7. The FHB numbers in this data might say more about AFG than it does about First Home Buyers. The ABS had the nationwide proportion at about 12% in October 2014 – having fallen from a high of 30% in 2009, and more recently falling virtually every month from Jan 2012’s 20%

    • ABS data calculates the FHB% on loan applications (excluding refinancing) AFG above accounts for FHB% of all loans written therefore I think they work out to be reasonably close. Its the trend that matters anyway

      • According to the AFG press release, AFG calculates its index on its share of the market – which it gives as around 10%.

        The press release also gives a long term average of around 15% of its loans being from FHBs, which is lower than the ABS average. of around 20% since records of FHBs began.

        A lot of the discussion was around the actual figure, rather than the trend, so the apparent sampling bias seems apposite. See, for example, the comments around WA FHBs above.

        Happy to stipulate that the trend is pretty aligned, though. The WA thing is also reflected in ABS figures, but not to the same extreme extent, which is what I was responding to.

  8. What happens when RE is no longer the home hearth, but, a fashion social status accoutrement with tax benefits.

    What happens when hold times comes down to single digits.

    Skippy…. this ain’t the 50s, 60s, 70s, nor 80s and as America just about destroyed its RE sector with clouded title and crappy loan compliance…. should we look at it with old timey optics anymore…

  9. Noticed a bit of wind of change in house price in NSW Hill District area! Taking longer to sell and vendor is willing to negotiate.

    Hopefully this is the start of the correction!

  10. the only question is, what to do with your cash whilst your waiting to buy a house?? this is as a fhb

    USD? eg usd.ax
    ubank and ‘earn’ 4.02 before tax??

    we have many hundreds of thousands in our account, and could buy, but choose not to just yet

    • Whatever happened to the government first home buyer savings accounts? Weren’t they offering some silly high interest rates?

      • they were cancelled last year. for anyone holding them longer than two years, they have to be used for housing or can be rolled into super.

        for anyone who has had one for 2 years (up to 30 june 2014) you can roll it out back into a retail deposit, at 30 June 2015. you keep the gains from the high interest rate though.

        I came into the latter category so am quite happy about the bonus rate, and not having to roll it into super or housing.

      • I have had my first home saver for 5 years got a nice payout of 5 grand over from the years from the government. Now I get to do whatever I want with it…

        I Just moved to WA so I feel out of place without a jet ski, HSV ute and boat. Cheers tax payers my assimilation in becoming a mining bogan of the west is complete!!!