Real Estate Sydney : First home buyers are an endangered species

Real Estate Sydney : First home buyers are an endangered species

Greg Rogers

Sydney 3 September 2014. New South Wales first home buyers are becoming an endangered species. Figures released today show that people who do not own their own home are facing almost insurmountable barriers in their quest to buy property. Given that property has been the foundation of many family fortunes and retirement savings, owning a property is vital.

Let's assume that first home buyers are largely represented by young families. They might be people in their first job after leaving school or higher education and they feel the need to own their own home. Their chances of becoming property owners are being harmed by New South Wales government policies that restrict First Home Buyer's Grants or stamp duty exemptions to people buying new property.

The insistence that they buy "NEW" property is fine for the building industry, government tax revenue and the developers who are transforming parts of Sydney with apartments like those in places such as Parramatta where units sell for $660,000.00 to $700,000.00 but a large percentage of the population cannot afford those prices.

Traditionally, older homes were the first step in property ownership but today first home buyers can only buy existing property if they want to accept help from the New South Wales government. In their quest to buy new property, they are competing on the open market with baby boomers and their superannuation funds, negative gearing tax property arrangements that make "loss" a good thing and potentially millions of overseas buyers who are allowed by buy in this country. The indigenous " Australian First Home Buyer" is truly an threatened species.

Businesses.com.au News asked REINSW President, Malcolm Gunning for comments on the decline in NSW First Home Buyer loans as outlined in a mortgage broker, AFG, report.

"The current rules make it hard for first home buyers to start on the property ladder. The government has enjoyed windfalls in unexpected stamp duty revenue yet they do not help first home buyers enough."

"First home buyers are no longer eligible to receive grants when purchasing existing properties. Not long ago young people bought one of the many 1970s apartments and houses in the outer suburbs and carried out improvements that boosted its value and allowed them to get some capital gains."

"The decision to provide first home buyer incentives only for new properties offers little support to most first home buyers who find new properties are at top of their budget or out of reach entirely."

"Stamp Duty incentives need to be amended to include existing homes. This is especially important in regional areas where construction is at a minimum and there are limited opportunities for first home buyers to take up grants restricted to new properties."

It is very hard to get a start in property. Saving for a deposit, legal fees and stamp duty can take a long time. The frustration of seeing low interest rates shimmering like a mirage in the face of very high prices is leading to resentment among local buyers, especially young people who are looking for a home not a tax deduction.

There are few, if any, quarantining provisions that protect Australian buyers from uncontrolled purchasing by non resident investers.

Governments have a responsibility to look at how they can look after the next generations of Australians, who at the moment, are under threat from government polices and invasive competition.

The AFG Report

FIRST HOME BUYING PLUNGES TO 4 YEAR LOW - LATEST AFG MORTGAGE INDEX

Fewer mortgages were arranged for first home buyers last month than at any time in the past four years according to AFG, Australia’s largest mortgage broker. AFG Mortgage Index shows that loans for first home buyers comprised only 9.5% of all mortgages processed in August – the lowest such figure since June 2010. Of the total $3.9 billion of home loans processed by the company, $324 million were for first home buyers. This contrasts sharply with the $1.5 billion arranged for investors.

First home buying patterns vary across the country. In New South Wales, first home buyers comprised just 3.5% of all mortgages processed. The equivalent figures were 5.5% in Queensland, 9.4% in Victoria, 9.8% in South Australia and 21.0% in Western Australia.

Mark Hewitt, General Manager Sales and Operations says: ‘The long term average for first home buyer loans is around 12% – 15% of the total. We saw overnight slumps from those levels when NSW and QLD withdrew first home buyer grants two years ago. Since then, property prices in Sydney in particular, have been steadily increasing. This represents a double-whammy for first home buyers. It also has important socio-economic implications when, even with interest rates at historic lows, people can’t afford to get on the property ladder.’

The AFG Mortgage Index shows the rate of mortgage growth slowed sharply in August 2014. Figures in the preceding months were around 20% higher than the corresponding months in 2013. August’s figure of $3.9 billion was 9.6% higher than in August 2013. It remains to be seen if this slow-down in growth reflects seasonal factors during the last month of winter, or longer term economic factors, such as the impact of the lack of first home buyers on the total market, concerns about unemployment and global instability.

The number of borrowers choosing to lock in fixed rates increased slightly from 24.0% in July to 24.9% in August, as this part of the home loan market becomes increasingly competitive. Similarly, the proportion of borrowers opting for introductory loans also remained high – 8.9% – relative to the long term average (around 5% of all new home loans), as more borrowers took advantage of special offers.

Loan to value ratios (LVRs), loans expressed as a proportion of property values, continued to nudge upwards in August to 69.5%. This compares to 68.2% in July and 66.6% in June.

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Source

http://www.afgonline.com.au/mortgage-index-september-2014/