More on rise of the FHB specufestor

By Leith van Onselen

Mortgage Choice has released its latest investor survey, which reveals that first home buyers (FHBs) continue to flock to investment properties:

According to Mortgage Choice’s latest Investor Survey, 36.6% of investors were first time buyers – significantly higher than the 21.1% recorded this time last year.

Mortgage Choice chief executive officer John Flavell said the results weren’t surprising given that property prices continue to rise substantially across Australia’s capital cities where “most people want to live”.

“Australians increasingly want to live close to work and where the action is, which is why most people like to live as close to the capital city centres as possible. Of course, with prices rising across most capital cities, purchasing property near or close to the city is becoming increasingly difficult for buyers – especially first home buyers,” he said.

“As such, we are seeing an increasing number of first time buyers purchasing investment properties before an owner occupied property as this allows them to buy where they can afford and still live where they want to.”

Mr Flavell’s comments were echoed by the data, with one in every four first time buyers admitting that they had purchased an investment property before an owner occupied property because it was more affordable.

This analysis, of course, follows that of Martin North from Digital Finance Analytics, who has been tracking FHB’s for quite some time, and notes that FHB’s primary motivations for entering the market are capital gains (32%) and the desire for somewhere to live (28%), with the former growing in importance and the latter shrinking. The prospect of gaining a tax advantage is also growing, now up to 10%, suggesting a strong speculative element creeping into the market (see next chart).


Earlier this month, The ABC’s 7.30 Report also ran a segment profiling FHB investors, who are taking advantage of FHB grants and/or negative gearing in order to break into the market.

Based on Martin North’s data, along with anecdotal evidence, it would appear that Australia’s FHBs are increasingly viewing housing as a wealth building tool rather than somewhere merely to live. Purchasing decisions also seem to be based on the fear of missing out, and the view that delaying potential entry into the market will make it less affordable later.

While everything worked out well for their parents, who built substantial wealth as Australia’s house values exploded, values are now at all-time highs against incomes and rents. When added to the massive structural adjustment facing the Australian economy – notably the ongoing fall in commodity prices and mining investment, along with the closure of the car industry – as well as the lack of significant downside for mortgage rates and the sluggish growth in both incomes and rents, now is an incredibly risky time for FHBs to be leveraging-up into the housing market.

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Leith van Onselen


  1. The Patrician

    The RBA’s record low interest rates are luring thousands of young Australians into high-risk, grossly-overpriced housing malinvestment and ultimately financial disaster.

    • The parents and grandparents of FHB’s that I have contact with, many are assisting their children/grandchildren with the deposit to get a foot in the door, using their own properties/super savings, but generally PPOR’s as security. Purely anecdotal from my limited perspective, but if this is common practice, then not only FHB investors are at risk, but also their parents/grandparents.

      • Can confirm this from my experience – not rampant, just a few people I know who are mostly from wealthier families.

      • That’s interesting Ranald. Most of my contact is with the middle to low income group. The middle income group is mixed with FHB PPOR and investors whereas the low income with FHB PPOR.
        Again, it’s just a personal observation, but real estate non- affordability seems to have an intergenerational risk element. I’m trying to figure out how to access the data.

      • It’s happening in the middle for sure. Every boomer I know is lamenting how the kids “will never be able to afford to get in” and the only way is to help them with cash or putting their home up as security. But as they say, “it’ll be a good investment for them”

        I predict a huge trend of parents needing to foreclose on their kids to fund their retirements.

      • Wealth is relative obviously so I show my middle (slightly upper-middle) class background. The truly wealthy people I know just buy inner city apartments for their kids (multiple), but I guess they just consider them investments.

    • Fear and greed – thats basically all you need to know about the markets… fear and greed!

      This is going to be a diabolical shakeout – and could toast Gen Y and part of Gen X too. No bad thing I suppose, we are a bit greedy and need a lesson.

      Kid you not, this correction will be brutalise the Mum’s and Dads. Expect a massive political backlash…

    • This is good. Chains break at their weakest link, so if, like me, you want to see this blow sky high with a spectacular bang and leave a huge crater, then adding lots of people with small balance sheets and small P&Ls to the chain is fantastic.

      • Yes and here we have the debt slaves of the future! They will be forced to work in jobs no one else wants to because they will be busy paying off all that negative equity, or just go bankrupt I guess.

    • The Patrician

      ..and all in the name of some half-assed attempt at currency manipulation. Cheered on by some here.
      History will rightly judge Stevens’ wilful monetary recklessness harshly.
      A legacy to be proud of.

      • Yep PT, monetary policy devoid of macroprudential policy is a blunt tool. Look out when the battler sinks below 60 and the RBA use IR to push it back up. Asset devaluation when the bubble pops and/or rising rates with sinking unemployment is not a pretty picture.

      • Even StevenMEMBER

        I’m not sure that’s accurate, Patrician.

        Is there anyone on here who has argued for lower interest rates WITHOUT macroprudential intervention?

      • Even Steven,

        I think the better question would be: Has anyone here stopped arguing for lower rates once it became crystal clear two years ago that there was not going to be any effective MP?

    • I stated here back in 2011, or 2012, that there is a word suitable for the luring of young people into buying overpriced houses.


      So very, very cruel.

      • and very cruel to their children who suffer because of the greed of this disgraceful nation. Having to grow up with parents stressed about money and paying high rents and mortgages is not a good recipe for a happy society, quite the opposite.

    • Fk every single one of these little rent seeking tax skimping bubble price paying debt prolifics.

  2. truthisfashionable

    Surely, “To capture future capital growth” passing “Need a place to live” is a sign of this insanity.

  3. More shit we’re gonna have to shovel through when this septic dam bursts and ‘negative equity mate’ is whispered at Centrelinks across oztraya.

    Were so fn stupid, we well n truly deserve the calamity that’s comin.

    • A financial “Natural Selection” to wipe out the unfit. Evolution is a great theory after all explaining the very nature of our greediest living species :). Maybe it is fair that “Global Warming” is actually a shout from mother Nature telling us that we are greedy enough to deserve extinction the same as the Dinosaurs were stupid enough to deserve it as well.

  4. Wellie you have AU, Equity’s or a Basic Need which is attached to Land…. and the bedrock to our currant sociopolitical – economic theory….

    Skippy… mental precursors and all….

  5. The problem is that a large percentage of the population does not see any risk whatsoever with purchasing property at ever increasing prices.
    They are pressured by family to jump on the property ladder before it’s too late, they see their friends getting rich from property investment, they read the papers which tell them that prices continue to surge, occasional articles about bubbles are dismissed as nonsense.
    Try having a logical conversation about the possibility of house prices falling with someone who owns one or more properties. They will laugh in your face.

    • My rule in life now is never to talk about property with specufestors, it always plays out the same way, them big noting themselves and talking rubbish the whole time.

      • it takes a shed load of patience and personal fortitude to not jump on the bandwagon though… when you see speculators so richly rewarded and savers / contrarians so readily crushed by the market / the government / the system, its easy to understand why even the most hardened anti-speculator can jump on the bandwagon and capitulate.

  6. It seems the apples don’t fall far from the (toxic) trees. Tax advantages and capturing future growth ie. speculating… hmm. The Boomers must be proud of their legacies now!

  7. Hoping this happens sooner rather than later so I can print up some “told you so” t-shirts with a link to Macro Business. All proceeds can go to MB.

  8. As a person who had a few friends buying in the GFC I’ve noticed two things that they always state.
    The first was that the GFC was a risky time to invest too (arguably more so) and yet everyone who took 100% loans at the time (and I know some who did) are laughing right now as the Australian Government backstopped their investment.

    The other fact is that a lot of FHB’s have no cash playing with FHBG’s and bank money so they have little skin in the game relatively speaking. if the economy crashes hard enough to sink housing no matter what your debt level is you will be in the same trouble if you lose your job. The only difference is your losses are capped in a bust scenario (aka they can’t take what you don’t have) and if a lot of people are going bust at the same time for the same reason there is an implicit bet that you will be able to start again from scratch. If your investing your own hard-earned then sure this logic does not apply but the FHB’s left who are either getting big LVR loans or using the bank of Mum-And-Dad have a different set of incentives.

    The Australian economy is mostly housing+finance or industries derived of it; if it goes pear shaped unless you have funds to invest offshore (most FHB’s don’t) then you will be stuffed either way should the house-of-cards fall down.

  9. Let’s say this inevitable correction that we keep on hearing about happens and property looses 50% of its value. In Sydney , values went up by 45% in the past 3 years so even if things go bad, it won’t be that much of a loss. There will be losers but it won’t be that bad in the major cities.
    I know many want to see carnage, and rightly so, but i don’t see it happening…
    Another thing is that politicians will do whatever it takes to keep this going on for as long as possible so i think we still have a long wait ahead before any correction to happen

    • flyingfoxMEMBER

      BTW, tell that to those in mining towns, Perth and Darwin. Brisbane and Adelaide have barely moved since the GFC. The correction is happening right now, just hasn’t gotten to Sydney and Melb and maybe it won’t because of foreign buyers. I wouldn’t bet on it though.

      • Agreed that a correction is happening in the mining states specifically but you can’t compare that to Sydney and Melbourne. Very different cases. anyone buying now will suffer for sure but i think buyers from 4-5 years ago will not be as badly effected by corrections especially with IRs this low and rba ready to push them down further

      • flyingfoxMEMBER


        Sydney and Melbourne. Very different cases.
        How so? What do Melb and Syd produce that the mining states don’t? What are the employment opportunities exists apart from construction?

      • Mostly immigration numbers and the fact that they are the 2 major cities in the country so money would float there first as seen with current wave of of foreign buying. Also, anyone who bought RE in the mining areas who didn’t factor in the fact that prices would go down when the mining boom recedes would have been shortsited just like governments iron ore forecasts has been

      • flyingfoxMEMBER

        current wave of of foreign buying.

        Have a look at what happened in the GC post the Japanese booms and the GFC. Very enlightening.

        Ultimately it is the local economy that supports house prices long term. Once the building stops, we’re in trouble unfortunately, atleast in Melb.

    • you seem to think that housing market corrections happen in clinica isolation.. like people wake up one day and say oh well, the value went up last year, down this year, you win some you lose some no harm done…

      unfortunately this isn’t the case, and there is ample real life examples of how and why this isn’t the case. Consider Ireland, where house prices rose rapidly and fell equally rapidly. Did life go on as normal there? Or Spain, or the US, or Japan?

      The point you miss is how interconnected the housing market is into the broader economy and broader society. In very high level terms, material house prices falls:
      – cause damage to the balance sheets of banks as NPL’s rise, profitability falls, capitalisation is eroded, confidence in the system is lost, ratings are downgraded, debt becomes much more expensive and harder to obtain (and in Australia’s almost unique case, very dangerous given the very high proportion of debt sourced offshore in wholesale / lumpy / confidence sensitive markets)
      – in response the banks severely restrict lending, perpetuating the downward price spiral as credit availability is fundamental to a rising market
      – the government is also hit – banks require bailout from the public purse, transfering private debt at the banks to public debt at the government. Government debt/GDP levels shoot up (recall the UK had debt/GDP of around 60% prior to the GFC, in triple digits post due to its RBS/HBoS bailouts). This impacts government spending on everything frorm healthcare to infrastructure to public sector employment.
      with an economy so hinged upon the FIRE sector, real estate and finance sector employment and growth is decimated, unemployment rises, confidence is destroyed. Falling interest rates have little impact given rates have already been cut so low, credit is unavailable and the banks do not price credit of the RBA’s rate (insteaad its determined by their own cost of funding and capital, which has been increased sharply as before)
      – so the economy is tanked – unemployment is in double digits, the banking system is stuffed, the fiscal balance sheet is stuffed and monetary policy is ineffective.
      – the ONE lever that may work is the falling exchange rate, as long as you have sectors which can benefit from this. Does Australia have a manufacturing / value add sector that will benefit from falling exchange rates? Toursim may benefit, but as Greece has shown this alone cannot dig the economy out. Mining is not going to save us and may instead be the straw that breaks the camels back.
      – You will likely see mass capital exodus – this is after all a market that is being driven almost exclusively by investors, either local or foreign. Will the Chinese investors (gamblers) stick around while their investments take a total bath? I doubt it, and if the experience of the capital flight that the Japanese took in the 80’s is any indicator, the foreigners will be rushing for the door in one large, illiquid mass as soon as it turns. There will be no foreign saviour.

      So yes, I think your idea that the housing market fall will have no impact is very shallow.

      To say it won’t happen in the future is also ridiculous, but I’ve run out of the will to show you why.

      • Jim, and all of you that keep mentioning the Japanese investors here in the 80s

        This has zero, I mean zero, relevance to today

        The Chinese are moving here to live, not just looking for a place to park money

      • really? I would love to see your evidence of this, all coming here to live eh?

        So assume you are right, shouldn’t we see net migration rates skyrocketing about now? What are all these mega wealthy Chinese going to do when they get here? Can they still run the same type of corrupt rackets they did in China, maybe exploit some cheap local Aussie labour, grease some palms in the local government, copy some IP from a foreign firm? What are they going to do here mate? If you say just import capital from China I would suggest you are sorely incorrect – you would be assuming they can sit in their $10m Glen Waverley mansion forever and just run their dodgy Chinese business remotely?

        I think you will find much of the investment in Australia is not occupied by the foreign investors. Most of the apartment buildings being constructed by the Chinese sit empty, in fact culturally the Chinese would prefer it to sit empty because once its been occupied / rented out it becomes ‘tainted’.

        By all means though I suggest you and your kids do go eyeballs up into debt to compete with the Chinese gamblers. I hope you welcome them in with open arms.

      • thx for the detailed reply Jim and I’m with you on all of the points you mention. My disagreement is in regards to the effect of such a correction on most of the market and mainly the major cities. Again, politicians will do whatever they can to kick the can further, the RBA will put IRs down, firb will do nothing in regards to foreign purchases… still a long way to go for any significant correction IMO

    • McPaddyMEMBER

      So let’s say it’s gone up 15% per annum for the past 3 years. And let’s say your “ears pinned back” speculator puts in $50k for a $500k place. Let’s assume it takes him/her 4 years to scrape together that $50k.

      In very rough figures:

      – The person who bought 3 years ago is back to zero, but still in negative cash flow for 3 years (and a number of years that follow the crash, as rents will also crash). All they’ve paid for their gamble is their cashflow loss. If they manage to keep their job, it’ll just be very painful.
      – The person who bought 2 years ago is about $125k in the hole, plus his cashflow loss. He won’t climb out of that hole for at least a decade. Every year of that decade he will have to tip money into the place. It will blight his financial future, delay marriage/children etc.
      – The person who bought 1 year ago is $162k in the hole. You can do the maths.

      Bear in mind too that as the bubble inflates, so too does the number of people rushing to participate, so the numbers of people in greater pain (ie. the recent purchasers) will be greater than those who bought 3 years ago.

      • NG and rental returns would help lower the pain I believe. i think the main issue that will force a sale would have to be unemployment for sure.
        I think your point about people rushing in to buy is actually proved by the stats from above charts.

      • flyingfoxMEMBER


        Look I hear what you are saying and I agree with most of it. The only thing we don’t explicitly agree on is the fact that not everyone will be in the same boat. On the way up and down, things are set at the margin. If enough, and it only needs to be a small fraction, people get in trouble, the sentiment spreads. People knuckle down… they say….misery loves company…

  10. What do you tell the kiddies?

    I was one of them and bought an IP in ’09.. what advice do I have for those in 2015?

    Same as your summary pretty much, market is hot.. wage increases are negligible and negative gearing won’t put food on your table

    I also tell them that the properties they are in contention for aren’t increasing in price, if you look at the Eastern Suburbs of Melb its only houses (land) that is increasing in value, apartment prices flat and unit have moved slightly

    So I say do you want to get liquored up and pay hot prices for a very small return (in most instances)

    They then ask so when will the market cool?

    I say there is no real risk of any government lead intervention against foreigners buying established homes so expect it to run hot indefinitely

    • so you think that Chinese will keep buying up no matter what the price…. maybe the average house price is $3m will still make sense? And that this is the only driver / impact?

      Do you think its reasonable to expect that there can be a time when there are NO local buyers, that all buyers are foreigners breaking the FIRB rules, and that every single local resident has been priced out, and that this can happen indefinitely?

      Pretty dumb assumptions.

  11. Jim, I suggest you go to Glen Waverley this weekend and attend a few auctions

    Local buyers will still have the outer suburbs and the inner North and West in Melbourne

    But the Inner and Middle suburbs in the East are going, going, gone

    As for how much are they prepared to pay, most weekends you won’t see a property sell for under $1 million in Glen Waverley, new homes are $3million

    Any intervention from the govt will be trivial, a media stunt, and foreign buyers often use proxies (local residents) to buy on their behalf

    • flyingfoxMEMBER

      The government doesn’t need to do anything. What you have just described is the destruction of the society. Most will eventually find something better to do with their money or rather somewhere better…

      • Wishful thinking

        Most on here are getting it wrong thinking these folks are sitting at the dinner table each night crunching the numbers

        They have vast sums of money, their ilk is growing by the day and are looking for a clean, safe and welcoming place for them to settle in

        They won’t just wake up one day and sell their holdings here

      • OK so by your theory, Glen Waverly, Inner Melbourne and East Melbourne will be bought and inhabited solely by foreign investors, who are willing to continually bid, at any price. Perhaps house prices in Glen Waverley will cost $10m in a few years? Is this realistic? As to local Australians being forced into the outer suburbs, why would the Chinese stop at Glen Waverley? Is there some natural barrier they must not cross?

        The whole argument is ridiculous. You are saying that Chinese gamblers will continue to bid and bid with no regard to well.. anything. Who cares about rental yields? Who cares about oversupply of property? Who cares about falling migration levels, rising unemployment, the end of the car industry and mining boom, who cares eh, they Chinese will continue bidding up prices, well, just because. The government will do absolutely nothing while locals are pushed further and further out with falling infrastructure etc etc.

        The problem with your argument is that is a classic pyramid scheme. It always requires the greater fool to keep on bidding up prices to be maintained. Heaven forbid one of those Chinese clowns turns around one day and asks ‘why am I paying more for a shit box in some place called Glen Waverley when I could be buying a mansion in Beverley Hills’. Then you will see the exact opposite of your rampant price appreciation – all those Chinese gambler clowns heading for the door, cashing in on their paper profits while people like you and your kin will be knee deep in debt, living in a house you can’t service. Just because you tried to keep up with said Chinese clowns.

      • flyingfoxMEMBER

        Most on here are getting it wrong thinking these folks are sitting at the dinner table each night crunching the numbers

        They have vast sums of money, their ilk is growing by the day and are looking for a clean, safe and welcoming place for them to settle in

        And where does this money come from? See what happened to the gold market when the Chinese share market collapsed? Surely none of that can happen to houses….

        BTW: The most I was referring to was Oz citizens.

    • where do you read this crap about Chinese just sitting around with vast sums of money with no place to hide it? Ever considered the average wage in China is $10k pa? Ever think that said wealthy Chinese have often obtained said wealth through corruption, with the loopholes for said corruption rapidly closing via Xi’s purge? When was the last time you were in Beijing, Shanghain or a secind tier city seeing what its actually like in China? No, you rock up to Glen Waverley auctions, see a few Chinese upping the bid and think you must get in on the ponzi, that it must last forever. Well go ahead, go deep, go hard on debt ole boy.

      You think there is just an endless stream of stupid money heading to Australia because…… the air is clean? You are going to get into debt over your head because of that?

  12. A young bloke at work bought an apartment in Melbourne as a FHB investment. He was screaming at the leasing agent two weeks after settlement because he was facing financial ruin because the apartment remained unlet. I had to let him go the next week because he just didn’t have the skills for the job. Poor fella.

    • therein lies the problem… the government permitting this market distortion of foreigners etc may be fine for now, but it is pushing many into debt they simply cannot afford, all just to compete and put a roof over their heads. Interest rates will have to keep coming down and down so the average Joe can get a loan. At some point, when interest rates hit zero, what will happen then? Rates will effectively have to stay at zero forever. Unlikely, yet so many muppets are going out getting 30 year mortgages on historically low interest rates to compete against Chinese clowns and NG boomers. I just wish they would pump the market up higher and higher, faster and faster, till its obvious even to guys like OMG that this is a bubble to burst, and then it will.

  13. “A friend of ours told us to get into property because you can’t go wrong. So we went to a property seminar and they said the same thing.”

    Oh dear.

  14. Maybe Niall Ferguson’s The Ascent of Money doco on ‘Safe as Houses’ needs to be re-broadcast, although more about CDOs etc. he did highlight both a key fact and myth, i.e. it’s an Anglo world issue, and assumption that ‘property always goes up’…..

    Same as touched upon here at MB, RE/media focus upon auctions and rubbery clearance rates when auctions represent only a minority of sales (but good ‘event’ for sellers to heighten emotions and media to promote), using median prices while spruiking above median properties, in mostly inner and eastern suburbs of Melbourne and Sydney (which may have more sticky demand), in addition to being economical with the facts on the real cost of borrowing (add 60%+ to amount borrowed?)

  15. Look, securitization was demand driven and Execs where making massive bonuses, that impetus has huge mass in the psychological depositions of the thoroughly head fooked indoctrinated consumers [whee free will]. That everything was centered on RE in the FIRE economy now leaves zero alternatives.

    Skippy…. you have to give the neoliberal credit, they stick to a plan no matter what….

    • flyingfoxMEMBER

      I want “youse” to become a word.

      I gather you don’t spend too much time with the “common people”….

      • Mining BoganMEMBER

        A teacher in my family loves to tell of walking into a classroom in country Queensland saying “Hughes, stand up” and then watching the whole class get to their feet..

    • I have a mutual friend that says it. Ok. Now he’s a friend.

      At dinner last Saturday night. My mate had enough and unleashed at him…

      It’s “you” not “youse”.
      “You all…”
      “All of you”

      Shakes head… “It’s not a word”
      Shakes head again…”It’s not a word”.

      • I always thought “youse” was not a word. My father had the same raged response when as a child i would utter “youse”. Im now a teacher and for 15 years i have corrected kids in the same passionate way my father had done with me. This year some smart arse kid doing advanced English (i teach computing/maths) says to me ” sir its actually a word. My English teacher told me” i proceeded to tell him both his teacher and him are fools. He says to me ” look it up if you dont believe me”. So i did just to prove a point. You know what? Some d#c ^head has put it in the dictionary and it is now so widely used in society that it is deemed acceptable to be considered a legitimate word. I apologised to the student and went promptly back to living the dream as a high school teacher.

      • In that case Adam, we need to reach out to Christopher Pyne to spend more on schools.


        We make T-shirt’s with the word youse crossed out (like a no smoking sign), and make money while educating Bogans.

      • Youse are idiots! If we had it your way, we’d all be speaking Shakespearean English. Language is organic. You will be overwhelmed. Try not to let snobbery make you angry at people if they mean no harm with their words. That’s probably how wars start….

  16. FOMO to the moon! Get in now because if you don’t, you’ll miss out for ever.

    Of course, this thinking iimplies that today’s school kiddies have all missed out forever and will never own a home unless they inherit it. Which is obvious rot.

  17. I always thought “youse” was not a word. My father had the same raged response when as a child i would utter “youse”. Im now a teacher and for 15 years i have corrected kids in the same passionate way my father had done with me. This year some smart arse kid doing advanced English (i teach computing/maths) says to me ” sir its actually a word. My English teacher told me” i proceeded to tell him both his teacher and him are fools. He says to me ” look it up if you dont believe me”. So i did just to prove a point. You know what? Some d#c ^head has put it in the dictionary and it is now so widely used in society that it is deemed acceptable to be considered a legitimate word. I apologised to the student and went promptly back to living the dream as a high school teacher.