2020 was the year of the first home buyer

Domain has declared 2020 the year of the First Home Buyer (FHB):

Many first-home buyers entered 2020 fearful they had missed their window to buy, but the unexpected events of the year have prompted the biggest entry-level property buying spree in a decade…

The year started with the rollout of the First Home Loan Deposit Scheme (FHLDS), with the federal government offering 10,000 first-home buyers the opportunity to get into the market with as little as a 5 per cent deposit, without paying lender’s mortgage insurance… an extra 10,000 FHLDS places were announced in the federal budget…

Then came HomeBuilder, which could be accessed on top of existing first-home-owner grants and stamp duty concessions and exemptions, adding up to tens of thousands of dollars in savings for eligible first-home buyers…

This, combined with record-low interest rates, a halt in population growth and pullback in investor demand, made an almost perfect window for those with secure employment to buy their first home, said AMP Capital chief economist Shane Oliver.

“All these things added up to something which made it a lot easier for first-home buyers to get into the market,” Dr Oliver said. “ It’s like an almost perfect environment … a perfect day. But there are a few clouds around – the main cloud is that prices are still so expensive…

The proof is in the pudding. FHBs have been taking advantage of the recent softness in dwelling prices, low interest rates and government stimulus, and account for more than 40% of total new housing loans — 10 percentage points higher than the long-term.
average:

This follows a 49% year-on-year rise in FHB mortgage commitments in the year to October.

The new home market is also booming on the back of surging FHB demand.

The rise in construction finance commitments is unprecedented:

Accordingly, detached house dwelling approvals also shot up to a 20-year high in October:

And who can blame them? Generous subsidies combined with super low mortgage rates has driven the cost of mortgage repayments below rental payments:

 

Unconventional Economist

Comments

    • Donald Rumsfeld

      House prices in Australia have an almost exact correlation with iron ore. 2008 is a very interesting price point – I would say more like 2010 – ore went to $184 before returning to $40 – the massive capital influx drove the housing market for several years after – iron ore, aud, house price collapse will have no capital influx to sustain it via a capex build – collapse imminent.

      • ErmingtonPlumbingMEMBER

        Maybe this influx of First home buyers is analogous to shoeshine boys giving stock tips.

        “In the winter of 1928, Joe Kennedy decided to stop to have his shoes shined before he started his day’s work at the office. When the boy finished, he offered Kennedy a stock tip: “Buy Hindenburg.” Kennedy soon sold off his stocks, thinking: “”You know it’s time to sell when shoeshine boys give you stock tips.”

        On the other hand this Plumber reckons ya cant go wrong with free standing houses in Ermo,….Oops,… I mean Sydney.

  1. The more interesting question will be whether they can keep their jobs throughout 2021 and how the reductions in Jobkeeper/seeker impact the wider economy and housing market.

    • Donald Rumsfeld

      So how do you think things will go for 90% of these new mortgages which were approved under Job Keeper when the banks find out they don’t have a job to go back to at the end of January ?

      We knew back in April that we would not have a clear picture till March 2021 of the housing market, and that the time to buy would be November 2021.

      Stand by that – as this is what most of the smart money is doing – sitting back and waiting to pick over the carnage – including MOI !!!

      • I’ll tell you what will happen when they have no jobs. Nothing. If the houses can’t be resold at a breakeven level or at a profit, the banks will suspend mortgage repayments until it can be sold. Or till the mortgage holder gets another job.

        If that takes several years, who cares. Mortgage holders won’t compalain, and the banks couldn’t give 2 sh1ts because the RBA can cover their losses.

        • Donald Rumsfeld

          RBA has only been able to maintain that charade because iron ore is at $1billionorwhateverperton – its heading back down to $50 and with that take the AUD and with that take the RBA’s TFF capacity.

          Outside of that banks and the RBA operate in the world of Bretton Woods and the reality of market forces and supply and demand – all the speculation about MMT theory in the world can’t hold back reality.

          Banks have shareholders, and obligations, RBA has bonds, collapsed AUD has devastating consequences. With the collapse of almost 40% of Australia’s exports in the last two months the fall of iron ore will explode our economy – and its time people started talking about it instead of the usual

          thisisfine.jpeg

          Economic reality is dawning on the entire western world and the fog of QE, unconventional stimulus and the biggest disaster of all time – MMT is being exposed for the insanity it is. An entire generation of economic conservatives are about to dance around naked drunk saying “told you so” – and fair enough.

      • How many people working in hospitality and similar actually getting jobkeeper earn enough to get a mortgage for a house in the major property markets?
        The reason prices remained strong and increased is because the high income earners that can afford property haven’t been effected much.

  2. I look forward to my 3 bedroom townhouse (0 BC) with a garage, and general quietness 25KM from the city, with ample space for my self only. Over this one bedroom apt I’m currently renting out next to Bell St. Bloody hurry up.

  3. Donald Rumsfeld

    Macrobusiness – secondary source for Domain and CoreLogic spruik – how the mighty have fallen.

    Anyhoo – massive FHB grant – and SURPRISE lots of FHB jump in – and just like last time, vanish just as quick.

    Last graph leaves off the last three years of data ?? Lols – sure thing, mmmmkay.

    Most of the new “credit” as has been detailed over and over again is from the banks creating NEW MORTGAGES from the RBA TFF ($200 Billion fund) created to purchase the collapsed mortgages back from the bankrupt buyers in order to not crash the Australian economy.

    But yeah – I mean – barely a house sold in Melbourne in the last few months – but sure. Whatever.

    • Jumping jack flash

      The economy is a debt ponzi.
      That is the reality, and wishful thinking isn’t going to change it.

      The main driver for me was that super is grossly inadequate for retirement. Half my working life is over, super paid to me the entire time, and I have a little over 2 years worth of income in super.
      Consider that this doubles over the next 20 years, then that’s still around 5 or maybe 6 years at most worth of income, for 20 years of retirement.

      By that time interest rates will well and truly be negative, Quarterly QE dumps will be keeping the economy alive, the place awash with immigrants getting their wages stolen, and super will be eroded at an alarming rate. All things being equal.

      On the other hand, if the debt ponzi economy is cured and we start getting some serious inflation then super will expand, but so will house prices, and possibly faster.

      I also don’t like the taste of catfood, but inevitably I will learn to love it after the age of 80 or so.

      • Donald Rumsfeld

        IF there is one thing that is beyond all question, most concrete fact on this entire planet, more accepted than water is wet, sun comes up – “inflation will crash the housing market through increased rates.”

        No ifs, no buts, no maybes – no discussion. Stone cold fact.

        • Until the RBA mandate is changed from setting rates to maintain an inflation rate to maintaining stability of the financial sector, and they run zero or negative rates into high inflation as a form of pseudo debt jubilee as the only way they can see out of the current mess.

  4. Jumping jack flash

    40K of super per household plus homebuilder will get you a suitably sized wad of debt.
    Note that homebuilder is not paid up front and probably can’t be used immediately, but most banks will now consider it as part of a deposit.
    And 6 months after the fact no bank will care where your 40K of super came from and very few ask. Out of all the lenders I’ve contacted and brokers and everyone, only the big4 have asked me the question, in passing.

    Looking at the quality of the completed house friends of ours were able to build using their 40K homebuilder (and super) I am very glad we decided to buy an existing property and resisted the urge to build. It was a big carrot though I must admit, and many mortgage brokers were pushing it as hard as they could when we were deciding which way to go in October last year.

    • Donald Rumsfeld

      Early withdrawal of super goes directly against your credit rating and can only be done with demonstration of extenuating circumstances and proven economic hardship.

      There is a massive echo chamber in these comment sections, and many fallacies turn into accepted mantra, the super furphy being one.

      You lie on these forums a lot – this one is demonstrably false.

      • Arthur Schopenhauer

        Not true.
        From a Super Fund FAQ:
        Question. Will accessing my super early impact my credit score or reduce my future borrowing power?
        Answer. No, a super withdrawal isn’t considered a form of credit, so it won’t be included in any official credit report.

        (There is the weasel word “official” in there.)

          • I’d believe banks wouldn’t touch you if you used the Hardship provisions pre cov, but this is a completely different situation with much lower threshold for withdrawals Maybe your broker should update his knowledge base.

    • It doesn’t go against your credit rating. It may not be treated as “genuine savngs” by the lender, but then again most lenders only require 5% of the purchase price to count as genuine savings which can include rent paid.

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