Investors dominate the mortgage market – as first home buyers are priced out

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Soaring prices and an influx of overseas buyers are pricing Australians out of the property market as reports show less than 10% of mortgages were processed for first-time buyers.


Australia’s largest mortgage broker AFG recently announced a record month for February 2014, processing mortgages worth a total $3.7 billion – a 27% increase on the same month last year.

But the report shows less than 10% of mortgages processed were for first home buyer applicants.

Of applications recorded, almost every state across Australia showed a month-on-month decline in first home buyer applications.
 
  • WA fell to 19.5% last month from 24.2% in January
  • South Australia fell to 13.1% from 15.5%
  • Victoria fell to 10.3% from 11.2%
  • New South Wales remained the lowest in the country on a steady 3.4%
The only state to buck the trend was Queensland rising slightly from 6.5% to 6.9%.

According RP Data research, property values climbed 9.8% in 2013 representing the fastest rate of annual growth since 2010. The direction of property prices has not changed in 2014, with combined capital city growth rising by 1.4% in the year to date.

Part of the problem for first home buyers is finding an affordable principal place for residence in a location that will not disrupt their current working and social lives.

This month, across Australia the lowest median price for any capital city is $410,000 for a house in Adelaide and $261,000 for a unit in Hobart.

March median house prices in Australian capital cities:
 
  • Sydney:  $690,000
  • Melbourne: $463,000
  • Brisbane: $465,000
  • Adelaide: $410,000
  • Perth: $530,000
  • Hobart: $370,000
  • Darwin: $590,000
  • Canberra: $532,000
-Source RP Data

AFG general manager of sales and operations Mark Hewitt said the overall, national figure for first home buyers has for some time concealed the reality that first home buying in NSW and QLD has been at very low levels since state government grants were withdrawn.

“Now that the WA figure has come off its very high levels, the issues faced by first home buyers are becoming more apparent,” he said.

“There has been some media commentary indicating that the ABS FHB numbers are understated however we disagree with this view. First Home Buyers are included in our data irrespective of whether they qualify for a grant or not and we clearly see a concerning downward trend.”

The recent influx of overseas buyers is also contributing to a rising market, according to a recent report from the Australian Foreign Investment Review Board.

The 2012/13 report showed approved foreign investment in Australian residential property totalled $51.9 billion and exceeded off shore investment in the resources sector, with investment in mineral exploration and development totalling $45.1 billion.

Of these overseas, investors the Chinese were prevalent in the market for property acquisition in Australia, with a report released by investment bank Credit Suisse predicting Australian property purchases by the Chinese will total $44 million over the next seven years.

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