Surprise, surprise.. it’s not first-home buyers vs investors!

According to rumour (and what you read in the papers, which is basically the same thing) first-home buyers are being squeezed out of the housing market in unprecedented numbers. Mostly they are being forced out by greedy investors and overseas buyers… boo hiss!

However a recent article by a respected commentator has proved this to be a bit of myth. For a start, apparently the ABS figures on first-home buyers, which are reported in the media, are only based on those first-home buyers who qualify for either a grant or stamp duty concession, which is not all of the market. In other words if you’re a first-home buyer but you don’t qualify for a grant or concession, you don’t get counted!

While everyone has been reporting the collapse of the first-home buyer market, the reality is that these figures are so unreliable, that the Reserve Bank has stopped using them. Even the ABS itself has admitted recently that it has concerns about the figures, including this note in its August housing finance data released recently: “Concerns have been raised that under-reporting could occur if some lenders were only able to accurately report on those buyers receiving a first home buyer grant,”

The ABS goes on to say it has conducted an investigation into the figures,
“The investigation indicates that some lenders experience difficulty reporting on loans where the buyer is not receiving a first home buyers grant.
“Estimates of loans to first home buyers are therefore under review and users are advised to exercise caution in referencing this data.”

Now we know that these figures aren’t good enough for the ABS, they certainly shouldn’t be good enough for anyone else… unless of course they were people who were interesting in perpetuating myths for the sake of a “good story”.

So if first-home buyers aren’t disappearing at the rate being reported and if they aren’t being forced out of the market by overseas buyers and investors, then what is the true picture of the Australian housing market?

The recently released NAB Residential Housing Survey tells a very different story. For a start, their chief economist Alan Oster points out that foreign investors aren’t really competing with first-home buyers, as they both operate in different parts of the market. (Presumably an investor looking for an apartment in the Docklands for example, isn’t competing with someone trying to buy a 3-bedroom home to start a family in Cranbourne! Which kind of makes sense!)

However Oster then goes on to say that it’s more the local investors who are providing competition to the first-home buyers. However when you recognise, as some observers have recently that frustrated first-HOME buyers, are actually turning into first-UNIT investors, you can see that some of these people are competing with themselves.

That is, that rather than buy into a home, many savvy young couples are investing in a unit first, to get a foothold into the property market and then planning to build up some equity in that for a few years, which they can then use to get into the actual home they want. This also allows them to rent a unit, from another investor (maybe even someone just like them) in an area they like to live in. Somewhere close to work, where they don’t need the expense of a car and has a good lifestyle.

But if that commentary is not enough, let’s have a look at the NAB’s figures, which are sourced differently from the questionable ABS figures quoted above.

According to the NAB report, first-home buyers made up 18.75% of the new housing market over the past year, compared with 17.4% in 2010, the year the survey started. (I don’t know about you but my maths tells me that’s a 1.35% INCREASE!)

It also reported that first-home buyers numbered 17.22% of the existing home market over the past year, again an increase from the 16.56% in 2010. (Again that appears to be an INCREASE, of 0.66%.)

While these increases are not huge, they are still an increase, NOT a decrease, that has been the theme of much media reporting.

Remembering too, that of course the housing market is now bigger than it was in 2010, seems to suggest that first home buyers are actually taking a slightly larger slice of an even bigger pie.

So rather than painting a gloomy picture of young couples being forced out of the housing market, some of these figures and commentary suggest that first-home buyers, like other older wiser people, are actually seeing the benefits of becoming property investors themselves!

Maybe the real agenda here is that those pushing the headlines of “affordability crisis” and “first-home buyers crisis” etc, all have some other agenda they are pushing. A political one perhaps?

If you’d like some other straight-talking facts on the property market, please feel free to contact me at vincent@investorsdirect.com.au


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