Trends in Housing Costs for First Home Buyers
How many times have you heard that now is the best time to buy your first home? Five, ten, maybe a hundred times? Dramatic cuts to interest rates, the First Home Owner Grant and easing property prices have combined to create a great platform for first home buyers. But is it all sweet and rosy, or are there still some major risks to buying property?
Of course there are risks when investing in something as big as property. House prices have risen over the past few decades, but so have wages, so is it really harder to buy property now than thirty years ago? Some recent figures from The Australian Bureau of Statistics (ABS) show that the choice to purchase a first home hasn’t really changed that much over thirty years.
Property Prices
According to ABS figures the average value of the homes bought by first home buyers has risen over the last decade, reaching $310,000 in 2005-06. Property prices have steadily risen across Australia in recent years and as average values were increasing, a large number first home buyers found themselves priced out of the market. By 2008, even a humble 2-bedroom house was out of reach for many. Obviously there were still first homebuyers who found a bargain, or could afford to buy a home, but current conditions now mean that many more Australian’s are able to buy their first home.
Loan Commitments
Between 1991 and 2008, the average loan commitment to first home buyers increased from around $96,100 to approximately $215,100. Obviously as house prices rise, first home buyer need to take out larger mortgages and borrow more to finance the property. The overall rise from July 1991 to March 2008 represented an average yearly increase of 5.0% over and above the rate of general price inflation.
Sales to First Home Buyers
During the year to March 2008, there were 135,000 housing finance commitments to first home buyers, equivalent to 6.4 new commitments per 1,000 people. This was higher than the average annual rate to March since data collection began in July 1991, although significantly lower than the record 7.7 commitments per 1,000 people in the year to March 2002. This peak was associated with increased commitments following the introduction of the First Home Owners Grant in July 2000
Adjusted to 2005-06 dollars, the nationwide average loan commitment to first home buyers rose from $96,100 in July 1991 to peak at $237,600 in June 2007, before falling to $215,100 in March 2008.
Average Repayments
In 2005-06, the housing costs (i.e. home loan repayments and property rates) of recent first home buyer households with a mortgage accounted for 27% of their gross weekly household income. This was similar to the proportion they paid in 1995-96 (26%), but higher than intervening years such as 1997-98 and 1999-2000 when their housing costs represented 20% of their gross weekly income.
According to the ABS, between 1995-96 and 2002-03, falling housing loan interest rates largely offset rising levels of mortgage borrowing, leading to the housing costs of first home buyers with a mortgage remaining steady in real terms. The average weekly outlay (in 2005-06 dollars) by recent first home buyer households with a mortgage on home loan repayments and property rates (general and water/sewerage) was $299 in 1995-96 and $304 in 2002-03.
Since 2002-03, these housing costs have increased considerably, as rising interest rates have combined with larger loans to generate higher interest charges and higher mortgage repayments. Between 2002-03 and 2005-06, average housing costs rose in real terms for recent first home buyers with a mortgage by an average of 11% per year to $415 per week (in 2005-06 dollars).
If you are ready to buy your first home and would like to talk more about how you can afford the repayments, then call and talk to a mortgage broker today on 130 787 665 begin_of_the_skype_highlighting 130 787 665 end_of_the_skype_highlighting.
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