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More first home buyers are entering the market as housing affordability improves

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There has been a large increase in first home buyer loans recently because of the improved housing affordability in all states. According to the Adelaide Bank / REIA Housing Affordability Report, the proportion of median family income necessary to meet loan repayments fell by 1.2% points over the quarter to 30.3%. It was a 0.6% point decrease compared with the same quarter last year.

Excluding refinancing, first home buyers reportedly make up about 24.5% of total owner-occupied market. According to REIA, it is the highest rate since September 2013 as rates dropped steadily for the past five years until the recent increase. The number of first home buyers rose by 22.8% over the quarter and 32.6% over the year.

This increase is reflected by the heightened activity in first home buyers re-rentering the market. Sydney and Melbourne still have housing affordability issues but there are some positive figures from other capitals that are worthy to note. The largest increase in first home buyers came from NSW at about 57.7%. Victoria comes next with around 32.2% and followed by the Northern Territory at 14.3%. There is also a 20% increase in first home buyers in the Australian Capital Territory.

The average loan size of first home buyers nationally increased by 0.6% or $319,000 over the September quarter. However, it dropped by 0.1% in the last 12 months. The average loan size of all borrowers fell to $380,900 with loans increasing by 4.2% for the quarter and 12.5% year on year.

Rental markets have varied affordability as well. The proportion of median family income necessary to meet rental costs increased by 0.3% points to 24.6% over the quarter. Rental affordability has improved in South Australia, Queensland, the Northern Territory and Western Australia. Victoria’s rental affordability remained steady but NSW, Tasmania and the ACT show a decline.

Western Australia is currently a standout, being the state or territory with the lowest proportion of family income devoted to meeting median rents. This is good news for first home buyers in the West who want to build a deposit and eventually buy their own home. The gap between renting and buying in Canberra is only at 0.4% now and that means more people renting in the ACT may decide to buy a home soon.

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