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First-home buyers flee as property prices continue to surge

The number of first-home buyers plummeted in July as housing affordability continues to be an issue for those entering the market, according to the Real Estate Institute of Australia (REIA).

REIA President Adrian Kelly explained the latest Australian Bureau of Statistics (ABS) figures showed that the number of first-home buyers fell 6.8 per cent in July.

The value of loans to owner-occupier, first-home buyers was down $1.23 billion from the January peak, in seasonally-adjusted terms, according to RateCity.

The level of commitments has fallen by 20 per cent since the beginning of the year.

“This is still 20 per cent higher than the previous year, however the removal of HomeBuilder could see further reductions,” Mr Kelly said.

“The largest fall was seen in Victoria, followed by Queensland and New South Wales, and it is likely these states will experience further falls as lockdowns continue to impact on the market.”

Mr Kelly previously noted property taxation was also increasing at an unsustainable rate, and was one of the largest barriers to housing affordability.

“Families across all the states and territories, except the ACT, are paying more stamp duty today than 20 years ago and it is time to get serious about stamp duty reform,” Mr Kelly said last month.

“Australia has had the fourth-fastest house price growth out of the world’s advanced economies over the past 20 years.”

RateCity Research Director Sally Tindall said investors continued to elbow out owner-occupiers in July, particularly those looking for their first home.

“The sharp decline in first-home buyers is concerning,” she said.

“They’re dropping out of heated auctions in droves, as bidding wars surge beyond their budgets.

“It’s hard to see when first home buyers will make a comeback in this climate.

“While growth in property prices is starting to slow, the asking prices are still too high for many Australians trying to get their first foot on the property ladder.”

The ABS figures also showed that borrower refinancing of housing loan commitments between lenders reached an all-time high of $17.22 billion after a rise of 6 percent in July 2021 (seasonally adjusted).

This was an increase of $978 million from the previous month, according to RateCity.

The figures indicated the value of refinancing between lenders was 60 per cent higher in July 2021 compared to a year ago.

Mr Kelly noted that those with mortgages are now seeking out lower interest rates with the value of new housing loan commitments rising by 0.2 per cent. 

“Demand from investors continues to dominate with this sector seeing continued growth over the past year, almost doubling in value,” he said.

“Investors re-entering the market is a very good thing for private rentals and overall confidence in the economy; but the end of first-home buyers housing stimulus programs introduced with the onset of the COVID-19 pandemic is a strong factor in these figures.”

Ms Tindall said the record high in refinancing comes on the back of some notable hikes to fixed rates, particularly among four and five-year terms.

“The recent spike in refinancing is likely to be driven, at least in part, by a fear of missing out on a good rate,” she said.

“We expect this surge in refinancing to continue as mortgage holders in lockdown use this time at home to give their finances a spring clean.

“According to the RBA, the average existing owner-occupier on a variable rate loan is paying 3.07 per cent, yet there are currently 181 mortgage rates on offer under two per cent.

“If your mortgage rate starts with a ‘three’, it could be time to jump on the refinancing bandwagon or at least pick up the phone and haggle with your current lender.”

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