First home buyers’ dream run is over

The beginning of this housing cycle was unusual in that it was driven overwhelmingly by first home buyers (FHB).

At its peak in January, FHB commitments had risen 73% year-on-year to a record high $7.2 billion monthly commitments. The share of mortgages going to FHBs also hit a post-Global Financial Crisis (GFC) high of 25.0%, up from less than 11% four years ago:

First home buyer mortgages

First home buyer mortgages hit an all-time high in January 2021.

A turning point has been reached, however, with FHB mortgage commitments falling 4.8% in the two months to March 2021, with FHB’s mortgage share also falling to 22.6%.

The primary reason is the strong rebound in investor mortgage commitments, which surged 29% over the first three months of 2021 and is now clearly crowding-out FHBs:

Mortgage share

Investors are once again crowding-out first home buyers.

Thus, we are witnessing a replay of the GFC whereby FHB mortgage commitments briefly rose above investor commitments only to then get crowded-out again.

The situation is unlikely to change. Investors are returning with gusto to the property market, as illustrated by the sharp 54% lift in investor mortgage commitments in the year to March:

Mortgage growth by component

Investor mortgage growth has rebounded hard.

The expiry of various grants and the appreciation of property prices will also work to choke-out FHB demand.

In short, FHB’s dream run appears to be over with investors beginning to power the boom.

Unconventional Economist

Comments

  1. Interest rates go up, buyers default and bankrupt, banks can only sell the house at a lower price during higher interest rates, banks still have to pay the bond holders of the loans.
    Sounds like fun 🙂

    • RatedAAAMEMBER

      Short term rates aren’t going anywhere for a while, especially in Australia. By the time they do most people will have deleveraged somewhat, especially if there’s a lag between wage inflation (assuming immigration intake is reduce permanently) and actual inflation.

      • How long’s it going to take to pay back the average $90k borrowed from the parents during a recession lol

        • Mining BoganMEMBER

          That money ‘loaned’ from parents and grandparents was never meant to be repaid.

          It’s just at the time the oldies didn’t know it.

        • Denis413MEMBER

          I think you’ll find the security and terms in general with BOMAD are quite favourable. No one will be kicked out of their home if they default on these loans.

  2. Lord DudleyMEMBER

    “Interest rates go up”… HAHAHA LOL! Not gonna happen. The RBA can create arbitrary amounts of new money whenever it wants to, and have absolute control over interest rates. They know rising rates will wipe out the Australian economy. They won’t do it. They’ll drive the currency through the floor and “look through” inflation when they need to.

    It took a couple of decades after we finally untethered from the gold standard and Bretton Woods for everyone to realize that money is literally nothing but numbers in computers. If the powers that be decide that money should be cheap and easy to get, then money will be cheap and easy to get.

    • working class hamMEMBER

      They really need inflation, just not enough to worry about rate rises. If they could actually get wage increases, within a few years, the debt would be back at a sustainable level. If Aust prints at the same rate as everyone else, is our dollar at risk?

      • Jumping jack flash

        I assure you they will look through any inflation below, say, 10%. Their agenda is plain to see.

    • Jumping jack flash

      This!

      All that matters now is debt growth rate and debt volumes. To achieve that growth we need to grow incomes, and incomes are paid for by prices. To break the catch-22 governments need to inject “stimulus”, which is essentially to be used to pay for the first round of price increases.

      This is why i am astonished that everyone is applauding companies for handing back jobkeeper, it was stimulus for a reason and it needs to go to the people, as intended, to pay for CPI! To hand it back is a colossal failure.

      When the entire economy is debt, to grow the economy is to grow the debt.

    • Display NameMEMBER

      I have put the white flag up and engaged a buyers agent to find a house on the south coast of NSW. I have far too much money in the bank from a sale a few years ago and no primary residence ATM. It is clear the government will follow the cheap debt, no lending standards path regardless of consequences.

      • From what I can see it seems like a lot of top end owners are getting out of their investment properties or selling their overly large homes now. For myself, this signals the top of the market.

        • Sold mine. I’m giving it a year. Too much greed out there – feels like the late ’80s.

          • If boomers parents & grandparents were still breathing it would probably feel like the 20’s & 30’s

          • Cynical snake

            Damn straight, anyone who has owned property since the 80’s has been screwed over…

          • GingerMEMBER

            Oh, this is much worse than the 80’s for residential dwellings. That implosion epicentre was commercial property; resi got a swipe too but not in the same league. Commerce remembers the lesson. This brewing quake is mega-tonne resi and personal debt.

    • FUDINTHENUDMEMBER

      BoomLord is available if you’re ever looking for a name change 👌

    • Out of curiosity is the word ‘boom’ used as a safe word at your relation parties or when a crescendo is reached?

    • Moments like these you need a Minsky

      BREAKING: Picture of Reusa now worth two thousand words!

  3. chuckmuscleMEMBER

    Taxing all leverage (the full borrowed amount) is the only policy prescription needed here. Put a price on money without enabling carry traders.

    • Cynical snake

      But they are clearly intent on making money as cheap as possible, so good luck with that…

  4. Anecdata: Top end house prices in this area are well over 100 percent higher than a year ago. More like 130 percent higher. Some are asking 200 percent more.

  5. So APRA has now quietly let the banks know that they are good to start the investor party. FHBs have had enough cheap credit for now, and it is time the savvy professionals had a turn.

    It was good of APRA and the RBA to let their favourite media sycophants know in advance of their intentions and rough timing so that they could look like sages forecasting this perfectly.

    • Charles MartinMEMBER

      hahaha, savvy professionals.

      I have a few of those in my family. I hate family gatherings now because it’s all talk about real estate and what house in the neighbourhood for what, see I told you so, my friends made a killing their IP last week, did you look at that real estate listing I sent you, why don’t you reply to the family Whatsapp etc. etc.

      Never thought I would think of my family as being insufferable, but here we are.

      • Ha Ha that’s all families now ..mine included..they are boring as F. Their conversation banal, clothing beige, home decor white on white🤮🤮

    • Jumping jack flash

      As predicted, satisfy the immense pent-up FHB demand by throwing every household 40K “free” from their own super, and then the investors jump in after prices rise as a result. It was pretty obvious.

      It is a shame though that Scomo missed the opportunity to actually increase the debt capacity of the economy by coaxing CPI to rise and then wages to rise. History tells us that house price inflation translates very poorly to wage inflation. Wage increases are required to support more debt, and more debt is required to support the economy and prevent deflation.

      This pretty much assures that this boom will fizzle out quite quickly as the debt limit is reached. As it was, we were bouncing along the debt ceiling for about half a decade with catastrophic results.

      A few more fools were able to impale themselves on the pike of debt, but that’s pretty much all we’re going to get as a result of all this.

  6. JunkyardMEMBER

    Mrs Junkyard and I have been looking seriously around Ringwood/Croydon/mooroolbark since January. Through Jan and Feb the open days had long queues of 40-50 people. Mostly young couples.
    It seems the staggering price jumps have chased them away. Now opens are getting 8 – 10 people at most.

    I don’t know what’s happening or where everyone went, or why the properties are selling still faster and higher even with seemingly fewer buyers.

    Feels like a 20 percent price jump in 3 months, it’s just crushing.

    • Narapoia451MEMBER

      We were looking since late Jan as well. Exactly the same experience, at least 20-30% jumps but by end of last month events were saying they were getting 5-10 enquiries where they were getting 50 at the beginning of the year. People just giving up. Inner West Sidney, out to Hornsby.

    • Goldstandard1MEMBER

      Famous quote from Braveheart:

      “It makes no sense to join the side that gets slaughtered”.

      Renting, trading good business stocks, contributing to super and having cash/gold leads to really nice sleep during these times of people chasing their tails hoping to leverage into no risk oblivion……..

      • Mining BoganMEMBER

        Yeah, I’ve lived those thoughts for a long time but it’s obvious that Australia is irretrievably broken…broken from the inside by greed and ignorance.

        We types who made their money sans housing and can exist independently are bring wiped out deliberately. I’ve always thought that the big players really didn’t like it when the small fish joined in their little game. You know, made it too easy to spot just how dodgy all those arsehats are. No easier way to oust the unwanted than by making markets nonsensical.

    • RatedAAAMEMBER

      I’d guess it’s buyer fatigue and repayment getting to the point where it makes more sense to rent. Still, a massive drop in enquiries.

    • Cynical snake

      FHB grants move demand forward, not create extra demand long term, so rather than be spread out, they all turned up at once. And now we are in the point the demand was brought forward from…

    • Scummo’s answer will be to let FHB access super for housing as a way of ‘helping’ FHB…. Get ready for that at the next election.

      • Haven’t they kind of already done that by stealth? A fair bit of FHB’s super must have leaked out into property through Covid.

  7. “Dream run”?? Hahaha.

    More like a NIGHTMARISH running of the gauntlet through hell.

  8. My youngest son’s girlfriend’s parents have been bidding at auctions. They recently went to one in the Canberra suburb of Florey. They were prepared to pay $1.2 million, which was the RE guidance, so were feeling a little optimistic. The place set a new suburb record of $1.6M, sold to an interstate buyer and they are apparently crushed and pretty much given up on their new home plans.

    I used to live in Florey, and $1.2M is a bizarre price for a house there. $1.6M is crack pipe stuff.

    On a side note, I just went to pay the stamp duty on my recent purchase. :Pain:. Anyway…ANZ won’t allow online transactions of more than $25K, so I went to do the transfer at a branch. The branch charged me $28 to do the transfer. $28 to do an EFT transaction FFS!

    I’m gonna complain and go for a refund of the stolen $28 and if they won’t come to the party I’m changing banks. Any recommendations for a non big 4 bank? My partner says ME Bank is good.

    • ChristopherMEMBER

      Find a good community bank, we went with Bendigo – the interest is slightly higher but you get to deal with a real person and the profit made the community branches goes back in to the local community.

    • my toranaMEMBER

      Maybe Qudos. it was Qantas Staff Credit Union.
      oooh I’m about to get a mortgage with ME…

      • LSWCHPMEMBER

        Straw and camel.

        Over the past year we’ve had a 4 month wait for a small loan approval, 3 failed settlements on a property transaction and a surreal experience where we tried to open an account and the bank said our application was faulty but couldn’t tell us what the fault was.

        The ABZ bank can’t successfully conduct routine business operations that are it’s raison d’etre. It’s not good to support such a defective business.

    • Lord DudleyMEMBER

      Nah. Everyone in Argentina isn’t dead. The future of Australia looks a lot like Argentina, but with way more fatties.

  9. MathiasMEMBER

    If MB is right and the dollar crashes to 30 cents, you’ll have foreign investors piling into the Australian Economy. buying out everything and the local population will die.