First home buyer slump: Call to better understand the impact on Australia’s future

Wednesday 5 March 2014

The latest edition of the Adelaide Bank/REIA Housing Affordability Report  shows that the proportion of median weekly family income required to meet home loan repayments for the December 2013 Quarter is back over thirty per cent.  Looking into the future, the apparent dearth of first time buyer activity should be a concern for policy makers, governments and the community generally.

Damian Percy, General Manager of Adelaide Bank said:  “We know that owner-occupier first home buyers are staying away from the property market in droves and have been for some time.  In spite of a benign interest rate environment, on current statistics, a historically low number of Australians do not seem to feel they are in a position to step onto the first rung of the property ladder. With a view to the future, I can’t see this playing out well. 

“If you look at pretty well all the budget-based estimates on people’s retirement income needs prepared by organisations like ASFA, the modelling assumes home ownership. We need to better measure and understand what could happen if the current figures reflect reality and plan accordingly.

“Unless we can reverse this trend, the most obvious outcome will be that there will be lot of people renting right up until they are of pensionable age.   The rents they may be able to afford on the aged pension in the private market at that point in time - in 40 to 50 years - are likely to be in areas well away from health-care and the other services they will require as ageing Australians.

“The decline in owner-occupied first home buyer activity does appear to have been offset to an extent by the latest RBA investor housing loan aggregates, which grew by 0.8% for the month of January and by 7.4% for the 12 months to January, so there could also be other behavioural forces at work here. 

“Encouraging home ownership should be a key priority for any home lender and Adelaide Bank is committed to working with the Real Estate Institute of Australia to contribute to the development of sound public policy that, if implemented, will help ease pressure on demand for affordable housing in many areas.

“Adelaide Bank’s contribution to improving housing affordability is to keep the cost of lending as low as we can, while providing great service through Australia's growing network of mortgage brokers”, Mr Percy concluded.