As a result of increasing mortgage rates, decreasing costs, and the fear of investing in a sinking market, the number of first-time homebuyers has dropped to levels not seen since 2017.
According to ABS data, only 7646 first-time purchasers obtained mortgages in December. New lending agreements have been relatively low since June 2017 (7,642).
Ray White chief economist Nerida Conisbee stated that first-time purchasers were discouraged from purchasing due to the possibility of future Reserve Bank interest rate hikes and the associated ambiguity. Both purchasers and vendors were scared off, which reduced the number of houses available for sale and drove down costs.
Conisbee said that people wanting to enter the market are currently limited. The market is rut because there’s not much to purchase, and you can’t finance much.
Additionally, until the unknown is cleared up, nothing is moving forwards.
The Reserve Bank of Australia has increased interest rates quickly since 1994, from a historic low of 0.1% to the current 3.1%. On Tuesday, most people anticipate another increase, between 0.25 and 0.4%.
Clinton Waters, the director of Axton Finance, said that many first-time buyers were not buying in a falling market because they wanted to “wait and see.”
Some bettors are stating, “I’m not going to attempt to capture the bottom because no one can do that. But if I’m observant and alert, I can make purchases at just the right moment.
Buyer’s advocate Alastair Mairs from the Property Bureau concurred that prospective homeowners were waiting it out.
He said they want to enter the market, but interest rate uncertainty is making them hesitant.
First-time homebuyers are just some of the ones affected, according to Conisbee.
She noted that the slowdown in business was affecting more than just first-time purchasers. Funding is expensive, and there needs to be more available inventory.
According to ABS data, the total valuation of new house credit agreements dropped by 4.3% in December and is now 29.3% lower than a year earlier.
Despite a recent Productivity Commission review finding these work against improving affordability, various incentives to buy are available across Australia, such as stamp duty discounts. However, the benefit to first-time buyers was mainly psychological and not enough to counteract the broader slump, as stated by Waters.
While the HomeBuilder grant from the Lockdown period is no longer available, the First Home Buying Option program was launched in NSW at the close of last year. Stamp duty is optional, and first-time homebuyers can pay a property fee based on the home’s worth instead.
Conisbee stated that the impact on the market is unknown at this time.
