FHB patsies stave off deeper property downturn

By Leith van Onselen

CoreLogic’s Daily home values index shows that quarterly values are falling fastest in Sydney (-0.94%) and Melbourne (-0.77%), which has dragged the five-city index down by 0.65% over the quarter:

As we have reported previously, first home buyer (FHB) stamp duty incentives were introduced in both NSW and VIC from 1 July 2017, which has driven a 63% and 24% respective lift in the number of FHB housing finance commitments versus the prior year:

Not surprisingly, these FHB bribes have led to much stronger price performance across so-called ‘affordable’ price points – i.e. the bottom 25% of properties by value –¬†in both Sydney and Melbourne.

As shown in the next chart, CoreLogic reports that the bottom 25% of dwellings by value in Sydney fell by just 0.3% in the April quarter, versus a 0.9% decline across the middle 50% of properties by value, and a 2.1% decline across the top 25% of properties by value:

Similarly over the year, the bottom 25% of dwellings in Sydney actually rose in value by 0.5% as at April, versus a 1.1% decline across the middle 50% of properties by value, and a 6.2% decline across the top 25% of properties by value:

Likewise in Melbourne, CoreLogic reports that the bottom 25% of dwellings in Melbourne actually rose by 1.1% in the April quarter, versus a 0.3% decline across the middle 50% of properties, and a 1.5% decline across the top 25% of properties by value:

Whereas over the year, the bottom 25% of dwellings in Melbourne rose in value by 11.7% as at the April, versus a 6.1% increase across the middle 50% of properties, and a 0.6% rise across the top 25% of properties:

The above charts suggest that dwelling prices would have fallen much further in Sydney and Melbourne if not for the FHB bribes implemented by both state governments.

FHBs are being used as cannon fodder against a property correction.

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Comments

  1. mark777MEMBER

    Look at 2009 the peak of FHB borrowing, we took advantage of the stamp duty concession, plus $24k incentive to build new home. But it was just timing for us, we were buying whether or not there were incentives
    They will throw more into it, hopefully it will be too late

  2. So… surprise surprise – people will always need places to live and the pent up demand can be shepherded/time-shifted into the land market to create inflationary outcomes.

    It is impossible to build our way out of this.

  3. So predominantly young couples are being encouraged to buy at the very peak of the market. Welcome to 30 years of servitude to an asset which is about to be poleaxed in value. If FHOGs and Stamp Duty exemptions are all that is getting you over the line it probably means that you are at the limits of serviceability. A sharp drop in values is going to put most of these recent FHBs in negative equity and there they are going to have to sit. No potential to refinance for fear of the lenders calling in their loans; absolutely at the mercy of the banks.

    What a collection of pond scum the government and our financial regulators are. They are supposed to be doing what’s best for the Australian people and here they are actively throwing a generation under a bus, just to kick the can a little further down the road.

    Seriously, this country turns my stomach!

  4. rentsailorMEMBER

    Was talking to a friend the other night. Potential FHB who has moved back home with folks (36 yrs old) to save for a deposit. Queried if she has her 20%. She replied you dont need 20.. She was quick to highlight, No stamp duty!

    I forwarded a few MB links, and it was info she’d never heard. Not even a clue to credit standards being tightened, 20% deposits (lucky she is pretty).

    FHB are definitely keeping the the scam going. Not sure where she will find a 2 x 1 with a carspace in Sydney for 650k by the time she has a deposit.

    Interesting times. Looking forward to the mid year growth/loss reporting.

    Down Down!

    • tightening lending standards wiped out any FHB benefits. Everyone that asks for a loan now will only be approved around 20% less than 6 months ago. So, the only way is down baby.

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