What does the year ahead look like for First Home Buyers?

Published on Topic:

The first home buyers market will remain challenging throughout 2014. In fact it could get worse as the market rebounds with additional pressure coming to bear on both houses and apartments as investors and second home buyers buy up. Both of these buyers have a capacity and an appetite.

Of concern for first home buyers is the trend where the non first home buyers are now extending the average amount they are prepared to borrow. Typically they have tracked around the same, with the exception of the government stimulus in 2009 where first home buyers were borrowing more than non first home buyers. As the table shows below, most States with the exception of Western Australia demonstrate greater capacity in the non-first home buyer market. Having said that, the Western Australian market is one that we are particularly nervous about. If non first home buyers are borrowing more, prices are starting to inflate, it is that simple.

There are however some real winners that could emerge in 2014 for First Home Buyers. As you can see from the above tables, Queensland represents the third cheapest entry point for this buyer cohort. It should also be noted that Queensland’s economy has turned the corner with some of the strongest employment growth in the country providing opportunities for both local purchasers and those individuals looking to relocate from another state at a significantly cheaper entry point.

NSW will remain one of the most challenging markets for first home buyers based on price, however Melbourne is likely to suffer on the back of losses to confidence and jobs in the outer suburbs, particularly those in industry. Melbourne’s outer suburban strength was always in its strong industrial and manufacturing sector, however the high Australian dollar has really placed significant pressure on the viability of many of those big employment generators. With a higher degree of uncertainty, many of those fringe urban areas will be tough.

The Northern Territory screams of boom bust economics, particularly as building approvals plummet from their highs. You can either see this as a good thing with supply limiting any massive overshoot, or as a bad thing that the market has already overshot the basics of supply and demand. One thing is for sure, with a small population and the highest entry point for first home buyers, there is a very real concern that this market is pricing itself out of any sustainable growth pattern.

It would be remiss not to comment on the home of one of football’s greatest rivalries, the Adelaide Crows and Port Adelaide. Adelaide has promised so much in terms of price that many east coast buyers look at with envy, however the employment opportunities are often very challenging, thereby keeping prices down. There is a saying, “if you can do business in Adelaide, you can do business anywhere.” Unfortunately for first home buyers the GFC was particularly hard on the employment opportunities of this demographic.

Despite this, South Australia continues to punch above its weight moreso as a result of its more modest prices. The closure of its car industry will be felt strongly, however they are a resourceful bunch in the south and I suspect it will be a watch this space evolution. The real concern that everyone should be talking about is the low interest rates. If the current economic environment and low interest rates don’t stimulate first home buyers, the question has to be asked as to whether the system is broken. Clearly much of the first home buyer policy around the country is more restrictive than past initiatives, and this has made entry often geographically polarised. However one does have to ask the question as to whether the Great Australian Dream of owning property actually resonates with a young population that is incredibly mobile and I suspect largely underemployed.

2014 may well prove to be the year of disillusionment for many first home buyers, however it may also prove to be the year where a genuine structural change occurs in our home ownership. Time will tell.

The National Property Research Company

Level 1, 307 Queen Street


Ph 07 3229 0111


Be In The Know – The National Property Research Co