First timers down but not out

There were 8,226 new home loan commitments by first home buyers during the month of May – 17.2 per cent higher than during the previous month.

While first home buyers only make up a small portion of the market, RP data research analyst Cameron Kusher said they form an important component of the market.

“When first home buyers purchase, it actually allows for more rental accommodation in the market - it also enables existing home owners to upgrade out of their first home into a superior second home,” he said.

“The volume of first home buyers in the market has historically been quite responsive to cuts in interest rates but not necessarily as responsive to increases in mortgage rates.”

As at May 2011, standard variable mortgage rates were recorded at 7.8 per cent which were slightly above the 10-year average level.

When mortgage rates dived in late 2008, first home buyers rose from just 19 per cent of all owner occupier finance commitments when mortgage rates peaked to a peak of 28.5 per cent by May 2009.

“Clearly the First Home Owners Grant Boost provided further stimulus to the market and as mortgage rates started to rise and the Boost was wound back, we saw first home buyer numbers fall to a low in February 2011 to 14.9 per cent,” Mr Kusher said.

Mr Kusher said that it’s unlikely we will see first home buyer activity increase much more in the short-term given current housing market conditions.

He believes that consumers have become extremely ‘debt cautious’ – a trend he expects to continue for the foreseeable future.