First Home Buyer Activity Falls to Record Lows

First home buyer activity in Victoria continues to fall in March quarter according to a recent release form property data provider RP Data.

Many have simply drawn to the conclusion that the high number of investors currently present in the Victorian marketplace has singlehandedly drove away first home buyers, however, this observation becomes one with little weight to support the argument when the data is thoroughly analysed.

Data available from the Australian Bureau of Statistics (ABS), indicates a rise in the overall share of all non-first home buyers rather than a staggering increase in investors.

“Analysis of data from the ABS shows that the market share of local investors has been cyclical over the past decade.” Said Robert Larocca – RP Data Victoria Housing Market Specialist

“In the most recent twelve months investors represented 36.1 per cent of the total value of loans in Victoria compared to 34 per cent in the preceding twelve months. In the twelve months ending Feb 2011 – the last rising cycle – the proportion was 37 per cent. A similar rise was also evident in 2007 suggesting that as the market strengthens so too does the level of investor activity rise.” Mr Larocca commented.

First home buyer activity has shrunk to record lows of recent times, with further ABS data supporting the findings.

“In February there were 1,402 dwellings financed for first home buyers in Victoria, a mere 11.7 per cent of the entire number financed. This was lower than in January when they represented 12.7 per cent of the market. In raw terms, this is the lowest since July 1991 when the population of Victoria was also 31 per cent lower than it is today. More first home buyers are staying in rented accommodation or with family.” Mr Larocca added.

“During the last rising cycle, in 2010, there were a higher proportion of both first home buyers and investors. When home values last peaked, in October of 2010, the proportion of first home buyers was 18.2 per cent. Over that year investors were 37 per cent of the market in value terms.” Mr Larocca Said.

To reiterate on the above, if first home buyers are being forced out to the market by higher investor activity we would have expected to see a decrease in first home buyer activity in 2010 and 2007 which was not the case. There have been other contributing factors which have changed over the past decade including the level of financial assistance made available to first home buyers and the types of property affected by such grants.

Auction Clearance Results

Sydney: 78%
Melbourne: 73%
Brisbane: 46%
Adelaide: 62%

(*Source APM)

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