Rising prices exclude first-home buyers

Rising prices exclude first-home buyers
Date of Publication: Thursday, 23 January 2014 14:16

Rising property prices are likely to shut first-home buyers out of the market for the foreseeable future, according to a new report.


First-home buyers face a struggle even if the rise in property prices begins to slow, the report from Fitch suggests, as weakened wage growth offers little support to younger Australians.


The global ratings agency found that Australians could expect average house prices to rise by around 4% this year, followed by at least the same again in 2015.


Even though this constitutes less than half of the gains experienced last year (9.8%), the difference between house price growth and wage growth remains enough to make life difficult for younger homebuyers trying to secure their first property.


Supply and Demand Oust First-Home Buyers

The Fitch report follows a trail of analysis showing how young Australians have been forced out of the real estate market.


Data analysts Veda attributed high mortgage demand to the steady fall in interest rates since 2011. New South Wales saw a 22.2% increase in demand in the December quarter on the previous year, it said, while Victoria saw year-on-year growth of 15.2%.


“It is likely that we will see a continuing increase in the near term, along with sustained house price growth,” said Angus Luffman, the firm’s general manager for risk.


SQM, meanwhile, said a steep fall in the supply of available properties – down 20% in December from the year before – had helped to drive prices upwards and force many buyers out of the market.


Consequently, first-time buyers have found themselves unable to keep up with rising prices as market conditions tighten.


The Australian Bureau of Statistics has shown that first-home buyers now constitute the lowest share of new home loans since its figures began in 1991.


Ben Newey, director at Fitch, said that housing affordability would deteriorate for the near future, as house prices continued to rise faster than income levels.


"The ability of self-managed super funds to borrow to buy property is also another factor that is locking young buyers out of the market," he added.


James Booker


If you enjoyed this article, check out the latest articles on our Finance Blog.

Thursday, 23 January 2014 14:16
Bookmark and Share

Make a comment on this article

Please enter the following letters in the box below.
We're very sorry for this but we just need to ensure
that you are not a computer.