The return of the first home buyer

The May 2012 housing finance data released recently by the Australian Bureau of Statistics (ABS) showed a sharp improvement in the number of owner occupier finance commitments to first home buyers.

Over the month, there were 9,303 new loan commitments by first home buyers which represented an increase of 28.9% from the previous month.

The number of first home buyer finance commitments has been trending higher since reaching a recent seasonal low of 5,648 commitments in January 2011. Over the past 10 years, there has been an average of 9,699 first home buyer finance commitments each month. Based on these figures, current commitment volumes are -4.1% lower than the 10-year average. However, they are 65% higher than they were at their recent low. It is also notable that first home buyer finance commitments are significantly lower than they were at their peak in May 2009 (18,871 commitments), a peak which was driven by first-timers taking advantage of the boost to the First Home Buyers Grant which was available between October 14, 2008 and the end of September 2009.

Across each of the major states there has been an improvement in the volume of first home buyer finance commitments over the month. The five largest states accounted for 95.9% of all first home buyer finance commitments over the month, with New South Wales, Victoria and Queensland accounting for almost three quarters (73.2%) of all first home buyer finance commitments nationally. It shows that first home buyers have a clear bias for purchasing in certain states rather than others. This is most likely due to factors such as job opportunities, home values, rental costs and various incentives which may be in place.

Another dynamic relevant to the recent improvement in first home buyer housing finance commitments is the fact that standard variable mortgage rates have fallen, as have home values over the past year, while rental rates have increased. As at the end of July 2012, capital city home values have fallen by -2.4% over the year while rental rates have increased by 3.0%. The average standard variable mortgage rate as at July 2012 was 6.85% compared to 7.85% a year earlier and an average rate of 7.36% over the past 10 years.