First-home buyers stepping up activity in WA and Queensland: Tim Lawless

First-home buyers have been stepping up their activity in the market over recent months, with the Australian Bureau of Statistics housing finance commitments data showing a 14.3% jump in the number of first-time buyer loans over the September quarter of 2012 compared with the September quarter of 2011.  First-home buyers now comprise 19.3% of all owner-occupier housing finance commitments, which is slightly higher than the decade average of 18.5%.

The number of housing finance commitments for first-time buyers has been very much influenced by the specific concessions and stimulus available at the state level.  For example, the stamp duty concession that was available in New South Wales up to December 31, 2011, resulted in a surge of first-time buyer activity leading up to the cut-off date (see black trend line below).  Similarly, in Victoria, the expiry of the state level first-home buyers' bonus on July 1 caused a similar surge in activity leading up to the expiry of the stimulus (red trend line in graph below).

More holistically, the first-home buyers' boost, which was provided by the federal government in late 2008 through to the end of December 2009, resulted in a record number of first-home buyers flowing into the housing market.  First-home buyers as a proportion of all owner-occupier housing finance commitments peaked at just over 30% in May 2009.

The response from first-home buyers to the concessions and stimulus demonstrates how much pent-up demand there is across this important segment of the housing market.  Affordability constraints are a significant factor for first time buyers, and a stamp duty saving or grant clearly makes a big difference to their sentiment towards a home purchase and their willingness to enter the market.

On a proportional basis, first-home buyers are most active in Western Australia and Queensland.  It seems that housing prices have little to do with attracting first-home buyers to a market, with the most affordable states for housing, Tasmania and South Australia, attracting the lowest proportion of first-time buyers.

Common sense would dictate that employment opportunities would be a factor in attracting first-home buyers, and that case can absolutely be argued in Western Australia, where there were over 68,000 new jobs created over the past year.  That isn’t the case in Queensland, which has shown a fall of nearly 43,000 jobs over the past year.

One explanation for the popularity of Western Australia and Queensland for first-time buyers is the fact that these two states attract the largest proportion of interstate migrants (you can see our wrap on population growth and interstate migration in a recent blog here).

While first-time buyers are becoming more active and comprise a larger than average proportion of the owner-occupier market, the raw numbers remain low from a historical standpoint, with the September number of first-home buyer finance commitments tracking almost 17% lower than the five year average.

Tim Lawless is national research director of RP Data.