Values across the property market could fall if first-home buyer activity slides, since there is a downturn in lending to investors and owner-occupier demand is drastically falling, according to CoreLogic’s recent Property Pulse.
First-home buyers have become more active in the housing market over the previous year due to declining dwelling values, which led to improved affordability, making the deposit hurdle easier than in the past. Since other segments of the market have been uncertain about entering the market, there was also less competition.
However, the latest data on housing finance from the Australian Bureau of Statistics revealed that the trend is slowly fading. Although the weakness has only been apparent for a few months, it will be essential to keep track of the condition, said CoreLogic.
The markets that include the country’s largest cities have recorded drastic falls in first-home buyer commitments.
New South Wales recorded 2,232 first-home buyer commitments to owner-occupiers in December, making it the lowest logged figure since July 2017. The number of commitments dropped by 5.2% over the month and was down by 3 % year-over-year. In terms of the share of total owner-occupier finance commitments, first-home buyers accounted for 24% of the NSW market (excluding refinance) — from 23.6% over the previous month.
However, overall owner-occupier mortgage demand (excluding refinances) slid by 6.1% over the month, a greater tumble than the 5.2% fall across the first-home buyer segment.
Victoria, meanwhile, had 2,604 first-home buyer finance commitments in December, the fewest in the state since June 2017. First-home buyer commitments were down by 7.7% over the month and 14.8% year-over-year.
Overall owner-occupier commitments, excluding refinances, posted a more substantial monthly fall (-10.4%). Owner-occupier commitments were up as a share of total commitments, however. The 29% increase in owner-occupier housing finance commitments was the highest share since July 2013. Hence, the share is rising but is tracking upwards on falling volumes for both first-home buyers and overall owner-occupiers.
“The more pragmatic potential first-home buyers are probably seeing values decline and despite incentives, they realise that if they remain on the sidelines the properties they are targeting could be becoming even more obtainable over the coming months,” CoreLogic said.
