House prices in Sydney and Melbourne are in decline and first-home buyers are wading into the market in search of a deal.
But many may find themselves disappointed, according to analysis of lending and property data, with entry-level buyers fighting for properties in some of the only areas without falling prices.
First-home buyers have grown their share of new loans to 18.1 per cent, according to the latest Bureau of Statistics data, which is the highest it has been since October 2012.
Shifting market dynamics appear to have finally turned in favour of first-home buyers, with the data showing loans to the group increasing 22 per cent over the last year, while loans to property investors falling 16 per cent.
But due to their return to form, prices in suburbs typically favoured by first-home buyers are holding strong while overall capital city medians weaken, according to Indeed Asia Pacific economist Callam Pickering.
“We’ve seen sizeable declines in prices across medium and higher-priced suburbs but that certainly hasn’t been the case for the cheapest suburbs.”Indeed Asia Pacific economist Callam Pickering
“We’ve seen sizeable declines in prices across medium and higher-priced suburbs but that certainly hasn’t been the case for the cheapest suburbs,” Mr Pickering said.
Earlier in the week I tweeted about how first home buyers were holding up the housing markets in Sydney and Melbourne. This graph highlights this: prices in the least expensive suburbs are holding up better than prices in more expensive suburbs in both cities #ausproperty pic.twitter.com/6G6HBnzwiK
— Callam Pickering (@CallamPickering)
August 10, 2018
First-home buyer incentives such as state-based stamp duty discount and exemptions, and the federal first-home buyer Super Saver Scheme now combine with improved mortgage rates for owner-occupiers to offer a better outlook for first-home buyers.
“It’s a demand story,” Mr Pickering said. “There’s increased demand at the lower end of the market – that’s holding prices up.”
In Victoria, no stamp duty is paid by a first-home buyer on a property under $600,000, while the same offer is extended in NSW for properties under $650,000.
Excluding rural areas, suburbs within reach of Sydney and Melbourne with a median price below $600,000 and $650,000, respectively, have seen an average price growth of 4.9 per cent in the past 12 months.
The overall median in these two cities has dropped 4.5 per cent and edged 0.5 per cent higher, respectively, over that period, with falls led by mid-to-high priced areas.
Prestigious suburbs of Melbourne such as Kew, Hawthorn and Balwyn fell 8.4 per cent over the year. In Sydney, the upper north shore fell 12.2 per cent, the inner west lost 11.4 per cent and the city and inner east gave up 8 per cent.
But after a busy 12 months, much of the first-home buyer benefits have now been priced into those areas, according to UBS economist Carlos Cacho, and price falls may be ahead.
Suburbs favoured by first-home buyers are expected to see an increase in apartment supply, Mr Cacho said, and advised first-home buyers to wait a few more months before bargain hunting.
“It’s a matter of being aware of what’s going on,” Mr Cacho said.
“There are going to be people who come under pressure when they’re forced to switch [from interest-only loans to principal and interest] and some of them may be forced to sell.”
“[The lower end of the market] has certainly held up better but it’s not immune to declines.”