• 14/06/2024

A new norm is being set, first home buyers aren’t coming back

Michael Matusik I Property Observer October 17, 2013


Q: Where have all the first home buyers gone?

A: Nowhere – and they are not coming back.

For those interested in property matters, you’ve probably been bombarded by tales of woe about all those poor first timers who cannot get into the market.

Nasty investors.  Rich baby boomers.  Property bubble.  The need for more grants.  Chinese buyers.  Overseas migrants.  Poor town planning.  Capital gains tax.  The blame game will go on and on…

According to the latest official figures released recently – well for August – first home buyers (FHBs) accounted for 13.7% (always best to get the decimal point in) of all loans – a nine year low.  The long term average is about 20%.


For mine, reasons for this low level of interest include:

  • They were brought forward.  The machinations with regards to the first home owners grant (FHOG) have interfered with the property cycle.  The FHOG is great politics, poor policy.  It is also inflationary and has resulted in fewer FHBs than would otherwise have been the case.  It needs to go away.

If it wasn’t for the FHOG, this trend – the decline in FHB numbers – would have started more than a decade ago and the decline would have been far more gradual.  Demographics shape everything.

  • Generation Y – the largest rental group – is more interested in travel and other lifestyle things than being saddled with a home loan.  They are partnering later, if at all, and history shows that unless one is getting serious about a relationship (and having children is being discussed or on the way), then the momentum to buy your first home is limited.  Renters have better things to spend their money on.  Also, they have more investment options – including their own portfolio of work – than their parents did.
  • Potential FHBs are happy to share accommodation, especially higher priced rental (and better quality/located) properties and experience the lifestyles that are outside their ability to obtain through home purchase.
  • HECS debt is also strangling FHB interest.  Under-employment is also having an impact.  Our employment situation is still somewhat shaky.
  • Expectations are out of whack.  Many FHBs want their first home to be like the one they currently live in.  Many still live at home – without paying rent or doing too much around the house.  There are plenty of options for FHBs to buy a property – for example, a third of all house sales in South East Queensland are still priced under $300,000 – but these properties aren’t good enough for many of today’s FHBs.

We aren’t likely to see FHBs come back into the market at volumes as seen over the past two decades or so.  A new norm is being set.  If this comes true, then we are likely to see three market impacts:

  • More renting.  But maybe not rental increases.
  • Fewer sales made by existing property owners – especially those holding more affordable houses.  Investors might, for a period, replace FHB interest and buy some of these second-hand properties, but investor interest will not be as stable as FHB interest.
  • Less heat in the overall property cycle – quite ironic given the conversation of late.  A Sydney-centric recovery (boom?) only (so far).  It takes all three market segments – investors, second and subsequent buyers and FHBs – to move together to drive a strong market recovery.

Those trying to sell second hand property – many of them looking to downsize and in more suburban locations – are the real losers here, not first home buyers.  Frankly, they have never had it so good.

Save your tears for something or someone else.


Read Previous

First home buyers are not locked out

Read Next

From crisis to cosy: why banking needs another inquiry

Accredited Broker