FIRST-home buyers, struggling to gain a foothold as Sydney and Melbourne house prices surge, have dropped to their lowest share of new home-loan approvals as investors pile in, in defiance of repeated Reserve Bank warnings.
In July, slightly more than 6700 Australians were granted a loan to buy a home for the first time, 12.2 per cent of the total number approved for owner-occupiers — the lowest percentage since records began in 1991.
“There is anecdotal evidence that some first-home buyers are being squeezed out by investors given tight housing supply … but the lower numbers of first-home buyers also reflects the preference for young people to rent rather than buy,” said Commsec economist Savanth Sebastian.
While the value of loans to owner-occupiers flatlined between June and July at $17.1 billion (up 7 per cent from a year ago), the value granted to investors jumped 6.8 per cent to $11.5 billion (up 30 per cent from a year ago).
“On a value basis, investors now comprise more than 40 per cent of new-loan commitments, well above the longer-term average and only slightly below the highest high seen during the property boom of 2003,” said economist Tom Kennedy at JPMorgan.
The Reserve Bank’s record low interest rates have fuelled a home-building and buying boom that has prompted a rapid rise in building and loan approvals and helped house prices post double-digit growth in Sydney and Melbourne — a development that has worried the Reserve Bank.
Why or more importantly how would a first home buyer buy in Sydney. While the human is so ignorant, pain and suffering will always be a close friend. Peter Ignorance is the true enemy of man.
Didn't Glenn advise fhb against 'competing with investors' during a recent speech?
Who knows for sure how to interpret his language, but there's little doubt yields in some areas are bordering on foul. The situation might sort itself out in the not too distant future for much of Sydney and Melbourne.
In his battle against cashed-up investors, aspirant first home buyer Adam Parsons, 31, has called for reinforcements.
He and his partner Sophie Church, 29, are paying for a buyer's agent to help them find a two-bedroom apartment they can afford close to the beach at Bondi.
"We are being priced out by investors and people who have more experience," Mr Parsons said.
With Domain Group data showing investors account for 60 per cent of all new home loans in Sydney and first home buyers just 4 per cent, it's no wonder novices are calling in the big guns.
Buyer's agent Simon Cohen of Cohen Handler, which has 21 agents across four offices in Sydney and one in Melbourne, says his firm is helping four first home buyers a week on average.
"We've seen a big increase in first home buyers coming to us," Mr Cohen said.
"We're often negotiating sales pre-auction because it's typically at auction that the prices are blowing them out of the water."
He says there are few bargains to be found. "We're able to negotiate a fair price rather than an inflated one."
Mr Cohen also claims his firm usually manages to save buyers up to 10 per cent on what they might otherwise pay, more than covering his fee, which is 2 per cent of the sale price.
His agents are often dealing as much with first home buyers as their parents, who are increasingly being called upon to fund the purchase because of Sydney's outrageous prices.
Auctioneer Will Hampson is seeing the same. "They're getting assistance from family, friends or even pooling resources," he said.
Otherwise, they've got little hope competing against cashed-up baby boomers, many who are accessing their self-managed super funds.
Mr Hampson and his wife, Kate - also an auctioneer - are like many investors in their late 30s who plan to buy investment apartments for their children "for when they move out".
"A lot of young people struggle to save $1000, let alone the $60,000 they might need to buy a $600,000 apartment," he said.
Australia-wide, recent research from Domain conducted by Nielsen shows 22 per cent of recent first home buyers have received a cash contribution from their parents towards their deposit, with 14 per cent using equity from their parents' home. And 16 per cent were using inheritance money.
When it comes to saving, 11 per cent of intending first-home buyers were joining savings with family or friends to buy property together.
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