First Home Buyers Due Back in Six Months

Struggling first home buyers could be back in the market within six months, analysts say.

BIS Shrapnel economist Jason Anderson says 25 to 35 year-olds are now moving on a "solid growth path" to property ownership after a slow period earlier this year.

"We think that we're moving to a higher level of first home-buyer demand in trend terms," Mr Anderson told a residential property conference in Sydney this week.

He said Australia was entering a more favourable environment for first home buyers, including more residential building, less upward pressure on interest rates and weaker population growth.

He said there was still demand for housing and forecast a decline in public sector construction spending in the year ahead.

But as economists predict Australian house prices will grow by five to ten per cent this year, an industry survey shows a lack of savings, not rising house prices, has been preventing young people from purchasing property.

Recent Australian Bureau of Statistics (ABS) figures for the March quarter show a sharp decline in first home buyers on a year ago.

However, Mr Anderson said the figures did not look "too different" to March 2006 and 2007 figures.

"If we can move sideways on first home buyer demand for the next three to six months, we will then start to see some recovery coming through and that will be some sustenance for the property cycle," he said.

The "number one" risk factor which prevented first home buyers from entering the market was banks tightening their lending criteria through loan to value ratios (LVR).

A survey of 134 Loan Market mortgage brokers released this week found 68 per cent cited a lack of genuine savings as the main factor preventing Generation Y from becoming first home buyers.

Mr Anderson, who heads the building and residential property forecasting division, said a solid turnover of established properties was conditional on first home buyers returning to the market.

"We're reasonably optimistic on that," he said.

ICAP economist Adam Carr said housing was still attractive for young people who were experiencing "lowish" interest rate levels and solid employment prospects.

"The fundamentals are still sound," Mr Carr said.

"Certainly there is enough in place to see a return of first home buyers early later this year or early next year."

BIS Shrapnel has forecast an annual rate of house price growth of between five to ten per cent for 2010.

But other house price growth forecasts are mixed.

"The anecdotal evidence we're getting from (real estate) agencies is that the market is slowing," President of the Real Estate Institute of Australia (REIA) David Airey told the property conference.

Australian Property Monitors (APM) economist Matthew Bell said he was sticking with his earlier predictions of an eight to ten per cent increase in national house prices for 2010.

"I think we'll probably get that."

But he predicted the growth rate would decrease over the next two quarters.

Meanwhile, AMP Capital Investors chief economist Shane Oliver is anticipating an irregular year ahead for prices.

"I think we're on track for strong growth... and a fairly patchy outlook for house prices going forward."

The only way house prices could fall would be from a major shock such as China falling over, sky rocketing interest rates or a massive increase in housing supply, he said.

Latest NewsFirst Home Buyers Due Back in Six MonthsFriday, 27 January 2017

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